CASES FOR JURSIDICTION

JUDGE PASAL

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149177

November 23, 2007

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., Petitioners,

vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the April 18, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution2denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese
consultancy firm providing technical and management support in the infrastructure projects of foreign
governments,3 entered into an Independent Contractor Agreement (ICA) with respondent Minoru
Kitamura, a Japanese national permanently residing in the Philippines. 4 The agreement provides that
respondent was to extend professional services to Nippon for a year starting on April 1,
1999.5 Nippon then assigned respondent to work as the project manager of the Southern Tagalog
Access Road (STAR) Project in the Philippines, following the company's consultancy contract with
the Philippine Government.6
When the STAR Project was near completion, the Department of Public Works and Highways
(DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler Road Improvement (BBRI)
Project.7 Respondent was named as the project manager in the contract's Appendix 3.1. 8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International
Division, informed respondent that the company had no more intention of automatically renewing his

ICA. His services would be engaged by the company only up to the substantial completion of the
STAR Project on March 31, 2000, just in time for the ICA's expiry.9
Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation
conference and demanded that he be assigned to the BBRI project. Nippon insisted that
respondents contract was for a fixed term that had already expired, and refused to negotiate for the
renewal of the ICA.10
As he was not able to generate a positive response from the petitioners, respondent consequently
initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and
between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted
that the claim for improper pre-termination of respondent's ICA could only be heard and ventilated in
the proper courts of Japan following the principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of
Kitamura by a certain Y. Kotake as project manager of the BBRI Project. 13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank14 that matters
connected with the performance of contracts are regulated by the law prevailing at the place of
performance,15 denied the motion to dismiss.16 The trial court subsequently denied petitioners' motion
for reconsideration,17 prompting them to file with the appellate court, on August 14, 2000,
their first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205]. 18 On August 23,
2000, the CA resolved to dismiss the petition on procedural groundsfor lack of statement of
material dates and for insufficient verification and certification against forum shopping. 19 An Entry of
Judgment was later issued by the appellate court on September 20, 2000. 20
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the
reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the
material dates and attaching thereto the proper verification and certification. This second petition,
which substantially raised the same issues as those in the first, was docketed as CA-G.R. SP
No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001
Decision22finding no grave abuse of discretion in the trial court's denial of the motion to dismiss. The
CA ruled, among others, that the principle of lex loci celebrationis was not applicable to the case,
because nowhere in the pleadings was the validity of the written agreement put in issue. The CA
thus declared that the trial court was correct in applying instead the principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25,
2001 Resolution.24
Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant
Petition for Review on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF
THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE

NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN

TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE
NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN
THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction
of Philippine courts in civil cases for specific performance and damages involving contracts executed
outside the country by foreign nationals may be assailed on the principles of lex loci
celebrationis, lex contractus, the "state of the most significant relationship rule," or forum non
conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the
respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has
already barred the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally
raising the same issues as those in the first one) and the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's
defective certification of non-forum shopping, it was a dismissal without prejudice. 27 The same holds
true in the CA's dismissal of the said case due to defects in the formal requirement of
verification28 and in the other requirement in Rule 46 of the Rules of Court on the statement of the
material dates.29 The dismissal being without prejudice, petitioners can re-file the petition, or file a
second petition attaching thereto the appropriate verification and certificationas they, in fact did
and stating therein the material dates, within the prescribed period30 in Section 4, Rule 65 of the said
Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the merits and
leaves the parties free to litigate the matter in a subsequent action as though the dismissed action
had not been commenced. In other words, the termination of a case not on the merits does not bar
another action involving the same parties, on the same subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even
if petitioners still indicated in the verification and certification of the second certiorari petition that the
first had already been dismissed on procedural grounds,33 petitioners are no longer required by the
Rules to indicate in their certification of non-forum shopping in the instant petition for review of the
second certiorari petition, the status of the aforesaid first petition before the CA. In any case, an
omission in the certificate of non-forum shopping about any event that will not constitute res judicata
and litis pendentia, as in the present case, is not a fatal defect. It will not warrant the dismissal and
nullification of the entire proceedings, considering that the evils sought to be prevented by the said
certificate are no longer present.34
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized
to verify and certify, on behalf of Nippon, the certiorari petition filed with the CA and not the instant
petition. True, the Authorization35 dated September 4, 2000, which is attached to the
second certiorari petition and which is also attached to the instant petition for review, is limited in
scopeits wordings indicate that Hasegawa is given the authority to sign for and act on behalf of the
company only in the petition filed with the appellate court, and that authority cannot extend to the
instant petition for review.36 In a plethora of cases, however, this Court has liberally applied the Rules
or even suspended its application whenever a satisfactory explanation and a subsequent fulfillment

of the requirements have been made.37 Given that petitioners herein sufficiently explained their
misgivings on this point and appended to their Reply38 an updated Authorization39 for Hasegawa to
act on behalf of the company in the instant petition, the Court finds the same as sufficient
compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the verification and
certification. As respondent pointed out, and to which we agree, Hasegawa is truly not authorized to
act on behalf of Nippon in this case. The aforesaid September 4, 2000 Authorization and even the
subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a few cases, we have ruled that
corporate powers are exercised by the board of directors; thus, no person, not even its officers, can
bind the corporation, in the absence of authority from the board. 40Considering that Hasegawa verified
and certified the petition only on his behalf and not on behalf of the other petitioner, the petition has
to be denied pursuant to Loquias v. Office of the Ombudsman.41 Substantial compliance will not
suffice in a matter that demands strict observance of the Rules.42 While technical rules of procedure
are designed not to frustrate the ends of justice, nonetheless, they are intended to effect the proper
and orderly disposition of cases and effectively prevent the clogging of court dockets. 43
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the
trial court's denial of their motion to dismiss. It is a well-established rule that an order denying a
motion to dismiss is interlocutory, and cannot be the subject of the extraordinary petition
for certiorari or mandamus. The appropriate recourse is to file an answer and to interpose as
defenses the objections raised in the motion, to proceed to trial, and, in case of an adverse decision,
to elevate the entire case by appeal in due course. 44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to
hear and resolve the civil case for specific performance and damages filed by the respondent. The
ICA subject of the litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals,
and written wholly in the Japanese language. Thus, petitioners posit that local courts have no
substantial relationship to the parties46following the [state of the] most significant relationship rule in
Private International Law.47
The Court notes that petitioners adopted an additional but different theory when they elevated the
case to the appellate court. In the Motion to Dismiss48 filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely argued that the applicable law which
will determine the validity or invalidity of respondent's claim is that of Japan, following the principles
of lex loci celebrationis and lex contractus.49 While not abandoning this stance in their petition before
the appellate court, petitioners on certiorari significantly invoked the defense of forum non
conveniens.50 On petition for review before this Court, petitioners dropped their other arguments,
maintained the forum non conveniens defense, and introduced their new argument that the
applicable principle is the [state of the] most significant relationship rule. 51
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in
theory, as explained in Philippine Ports Authority v. City of Iloilo.52 We only pointed out petitioners'
inconstancy in their arguments to emphasize their incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of judgments. Corresponding to these

phases are the following questions: (1) Where can or should litigation be initiated? (2) Which law will
the court apply? and (3) Where can the resulting judgment be enforced? 53
Analytically, jurisdiction and choice of law are two distinct concepts.54 Jurisdiction considers whether
it is fair to cause a defendant to travel to this state; choice of law asks the further question whether
the application of a substantive law which will determine the merits of the case is fair to both parties.
The power to exercise jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often coincide, the "minimum contacts"
for one do not always provide the necessary "significant contacts" for the other.55 The question of
whether the law of a state can be applied to a transaction is different from the question of whether
the courts of that state have jurisdiction to enter a judgment.56
In this case, only the first phase is at issuejurisdiction. Jurisdiction, however, has various aspects.
For a court to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the
plaintiff or the petitioner, over the defendant or the respondent, over the subject matter, over the
issues of the case and, in cases involving property, over the res or the thing which is the subject of
the litigation.57 In assailing the trial court's jurisdiction herein, petitioners are actually referring to
subject matter jurisdiction.
1wphi1

Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
which establishes and organizes the court. It is given only by law and in the manner prescribed by
law.58 It is further determined by the allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein. 59 To succeed in its motion for the dismissal of
an action for lack of jurisdiction over the subject matter of the claim,60 the movant must show that the
court or tribunal cannot act on the matter submitted to it because no law grants it the power to
adjudicate the claims.61
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not
properly vested by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 000264 for specific performance and damages is one not capable of pecuniary estimation and is
properly cognizable by the RTC of Lipa City.62What they rather raise as grounds to question subject
matter jurisdiction are the principles of lex loci celebrationisand lex contractus, and the "state of the
most significant relationship rule."
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the "law of the place of the ceremony"63 or the law of the place where
a contract is made.64 The doctrine of lex contractus or lex loci contractus means the "law of the place
where a contract is executed or to be performed."65 It controls the nature, construction, and validity of
the contract66 and it may pertain to the law voluntarily agreed upon by the parties or the law intended
by them either expressly or implicitly.67 Under the "state of the most significant relationship rule," to
ascertain what state law to apply to a dispute, the court should determine which state has the most
substantial connection to the occurrence and the parties. In a case involving a contract, the court
should consider where the contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the parties.68 This rule takes into account
several contacts and evaluates them according to their relative importance with respect to the
particular issue to be resolved.69
Since these three principles in conflict of laws make reference to the law applicable to a dispute,
they are rules proper for the second phase, the choice of law.70 They determine which state's law is
to be applied in resolving the substantive issues of a conflicts problem. 71 Necessarily, as the only

issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet
called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have
not yet pointed out any conflict between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation requiring the application of the conflict
of laws rules.72 Also, when the law of a foreign country is invoked to provide the proper rules for the
solution of a case, the existence of such law must be pleaded and proved. 73
It should be noted that when a conflicts case, one involving a foreign element, is brought before a
court or administrative agency, there are three alternatives open to the latter in disposing of it: (1)
dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States. 74 The
courts power to hear cases and controversies is derived from the Constitution and the laws. While it
may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law
short of treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial court of its
jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of
the Rules of Court does not include it as a ground. 77 Second, whether a suit should be entertained or
dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and
is addressed to the sound discretion of the trial court. 78 In this case, the RTC decided to assume
jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual
determination; hence, this conflicts principle is more properly considered a matter of defense. 79
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed
by respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the
trial and appellate courts correctly denied the petitioners motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162416

January 31, 2006

CHESTER DE JOYA, Petitioner,

vs.
JUDGE PLACIDO C. MARQUEZ, in his capacity as Presiding Judge of Branch 40, Manila-RTC,
PEOPLE OF THE PHILIPPINES and THE SECRETARY OF THE DEPARTMENT OF
JUSTICE, Respondents.
DECISION
AZCUNA, J.:
This is a petition for certiorari and prohibition that seeks the Court to nullify and set aside the warrant
of arrest issued by respondent judge against petitioner in Criminal Case No. 03-219952 for violation
of Article 315, par. 2(a) of the Revised Penal Code in relation to Presidential Decree (P.D.) No. 1689.
Petitioner asserts that respondent judge erred in finding the existence of probable cause that justifies
the issuance of a warrant of arrest against him and his co-accused.
Section 6, Rule 112 of the Revised Rules of Criminal Procedure provides:
Sec. 6. When warrant of arrest may issue. (a) By the Regional Trial Court. Within ten (10)
days from the filing of the complaint or information, the judge shall personally evaluate the resolution
of the prosecutor and its supporting evidence. He may immediately dismiss the case if the evidence
on record clearly fails to establish probable cause. If he finds probable cause, he shall issue a
warrant of arrest, or a commitment order if the accused has already been arrested pursuant
to a warrant issued by the judge who conducted the preliminary investigation or when the
complaint or information was filed pursuant to section 7 of this Rule. In case of doubt on the
existence of probable cause, the judge may order the prosecutor to present additional evidence
within five (5) days from notice and the issuance must be resolved by the court within thirty (30) days
from the filing of the complaint or information.
x x x1
This Court finds from the records of Criminal Case No. 03-219952 the following documents to
support the motion of the prosecution for the issuance of a warrant of arrest:
1. The report of the National Bureau of Investigation to Chief State Prosecutor Jovencito R.
Zuo as regards their investigation on the complaint filed by private complainant Manuel Dy
Awiten against Mina Tan Hao @ Ma. Gracia Tan Hao and Victor Ngo y Tan for syndicated
estafa. The report shows that Hao induced Dy to invest more than a hundred million pesos in
State Resources Development Management Corporation, but when the latters investments
fell due, the checks issued by Hao in favor of Dy as payment for his investments were
dishonored for being drawn against insufficient funds or that the account was closed. 2
2. Affidavit-Complaint of private complainant Manuel Dy Awiten.3
3. Copies of the checks issued by private complainant in favor of State Resources
Corporation.4
4. Copies of the checks issued to private complainant representing the supposed return of
his investments in State Resources.5
5. Demand letter sent by private complainant to Ma. Gracia Tan Hao. 6

6. Supplemental Affidavit of private complainant to include the incorporators and members of

the board of directors of State Resources Development Management Corporation as
participants in the conspiracy to commit the crime of syndicated estafa. Among those
included was petitioner Chester De Joya.7
7. Counter-Affidavits of Chester De Joya and the other accused, Ma. Gracia Hao and Danny
S. Hao.
Also included in the records are the resolution issued by State Prosecutor Benny Nicdao finding
probable cause to indict petitioner and his other co-accused for syndicated estafa, 8 and a copy of the
Articles of Incorporation of State Resources Development Management Corporation naming
petitioner as incorporator and director of said corporation.
This Court finds that these documents sufficiently establish the existence of probable cause as
required under Section 6, Rule 112 of the Revised Rules of Criminal Procedure. Probable cause to
issue a warrant of arrest pertains to facts and circumstances which would lead a reasonably discreet
and prudent person to believe that an offense has been committed by the person sought to be
arrested. It bears remembering that "in determining probable cause, the average man weighs facts
and circumstances without resorting to the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men
have an abundance."9 Thus, the standard used for the issuance of a warrant of arrest is less
stringent than that used for establishing the guilt of the accused. As long as the evidence presented
shows a prima facie case against the accused, the trial court judge has sufficient ground to issue a
warrant of arrest against him.
The foregoing documents found in the records and examined by respondent judge tend to show that
therein private complainant was enticed to invest a large sum of money in State Resources
Development Management Corporation; that he issued several checks amounting
to P114,286,086.14 in favor of the corporation; that the corporation, in turn, issued several checks to
private complainant, purportedly representing the return of his investments; that said checks were
later dishonored for insufficient funds and closed account; that petitioner and his co-accused, being
incorporators and directors of the corporation, had knowledge of its activities and transactions.
These are all that need to be shown to establish probable cause for the purpose of issuing a warrant
of arrest. It need not be shown that the accused are indeed guilty of the crime charged. That matter
should be left to the trial. It should be emphasized that before issuing warrants of arrest, judges
merely determine personally the probability, not the certainty, of guilt of an accused. Hence, judges
do not conduct a de novo hearing to determine the existence of probable cause. They just personally
review the initial determination of the prosecutor finding a probable cause to see if it is supported by
substantial evidence.10 In case of doubt on the existence of probable cause, the Rules allow the
judge to order the prosecutor to present additional evidence. In the present case, it is notable that
the resolution issued by State Prosecutor Benny Nicdao thoroughly explains the bases for his
findings that there is probable cause to charge all the accused with violation of Article 315, par. 2(a)
of the Revised Penal Code in relation to P.D. No. 1689.
The general rule is that this Court does not review the factual findings of the trial court, which include
the determination of probable cause for the issuance of warrant of arrest. It is only in exceptional
cases where this Court sets aside the conclusions of the prosecutor and the trial judge on the
existence of probable cause, that is, when it is necessary to prevent the misuse of the strong arm of
the law or to protect the orderly administration of justice. The facts obtaining in this case do not
warrant the application of the exception.
lavvph!l.ne+

In addition, it may not be amiss to note that petitioner is not entitled to seek relief from this Court nor
from the trial court as he continuously refuses to surrender and submit to the courts jurisdiction.
Justice Florenz D. Regalado explains the requisites for the exercise of jurisdiction and how the court
acquires such jurisdiction, thus:
x x x Requisites for the exercise of jurisdiction and how the court acquires such jurisdiction:
a. Jurisdiction over the plaintiff or petitioner: This is acquired by the filing of the complaint,
petition or initiatory pleading before the court by the plaintiff or petitioner.
b. Jurisdiction over the defendant or respondent: This is acquired by the voluntary
appearance or submission by the defendant or respondent to the court or by coercive
process issued by the court to him, generally by the service of summons.
c. Jurisdiction over the subject matter: This is conferred by law and, unlike jurisdiction over
the parties, cannot be conferred on the court by the voluntary act or agreement of the
parties.
d. Jurisdiction over the issues of the case: This is determined and conferred by the pleadings
filed in the case by the parties, or by their agreement in a pre-trial order or stipulation, or, at
times by their implied consent as by the failure of a party to object to evidence on an issue
not covered by the pleadings, as provided in Sec. 5, Rule 10.
e. Jurisdiction over the res (or the property or thing which is the subject of the litigation). This
is acquired by the actual or constructive seizure by the court of the thing in question, thus
placing it in custodia legis, as in attachment or garnishment; or by provision of law which
recognizes in the court the power to deal with the property or subject matter within its
territorial jurisdiction, as in land registration proceedings or suits involving civil status or real
property in the Philippines of a non-resident defendant.
Justice Regalado continues to explain:
In two cases, the court acquires jurisdiction to try the case, even if it has not acquired jurisdiction
over the person of a nonresident defendant, as long as it has jurisdiction over the res, as when the
action involves the personal status of the plaintiff or property in the Philippines in which the
defendant claims an interest. In such cases, the service of summons by publication and notice to the
defendant is merely to comply with due process requirements. Under Sec. 133 of the Corporation
Code, while a foreign corporation doing business in the Philippines without a license cannot sue or
intervene in any action here, it may be sued or proceeded against before our courts or administrative
tribunals.11
Again, there is no exceptional reason in this case to allow petitioner to obtain relief from the courts
without submitting to its jurisdiction. On the contrary, his continued refusal to submit to the courts
jurisdiction should give this Court more reason to uphold the action of the respondent judge. The
purpose of a warrant of arrest is to place the accused under the custody of the law to hold him for
trial of the charges against him. His evasive stance shows an intent to circumvent and frustrate the
object of this legal process. It should be remembered that he who invokes the courts jurisdiction
must first submit to its jurisdiction.
WHEREFORE, the petition is DISMISSED.

No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173946

June 19, 2013

BOSTON EQUITY RESOURCES, INC., Petitioner,

vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the
Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court of
Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent's petition for
certiorari upon a finding that the trial court committed grave abuse of discretion in denying
respondent's motion to dismiss the complaint against her.3Based on this finding, the Court of Appeals
reversed and set aside the Orders, dated 8 November 2004 4 and 22 December 2004,5 respectively,
of the Regional Trial Court (RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance
of a writ of preliminary attachment against the spouses Manuel and Lolita Toledo. 6 Herein
respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to
Admit Amended Answer7 in which she alleged, among others, that her husband and co-defendant,
Manuel Toledo (Manuel), is already dead.8 The death certificate9 of Manuel states "13 July 1995" as
the date of death. As a result, petitioner filed a motion, dated 5 August 1999, to require respondent to
disclose the heirs of Manuel.10 In compliance with the verbal order of the court during the 11 October
1999 hearing of the case, respondent submitted the required names and addresses of the
heirs.11 Petitioner then filed a Motion for Substitution,12 dated 18 January 2000, praying that Manuel
be substituted by his children as party-defendants. It appears that this motion was granted by the
trial court in an Order dated 9 October 2000.13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing,
among others, the dates of hearing of the case.14
The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its
exhibits were thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement of
the parties. On 24 September 2004, counsel for herein respondent was given a period of fifteen days
within which to file a demurrer to evidence.15 However, on 7 October 2004, respondent instead filed a
motion to dismiss the complaint, citing the following as grounds: (1) that the complaint failed to
implead an indispensable party or a real party in interest; hence, the case must be dismissed for
failure to state a cause of action; (2) that the trial court did not acquire jurisdiction over the person of
Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) that the trial court erred in
ordering the substitution of the deceased Manuel by his heirs; and (4) that the court must also
dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court. 16
The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been
filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within the
time for but before filing the answer to the complaint or pleading asserting a claim, a motion to
dismiss may be made x x x."17Respondents motion for reconsideration of the order of denial was
likewise denied on the ground that "defendants attack on the jurisdiction of this Court is now barred
by estoppel by laches" since respondent failed to raise the issue despite several chances to do so. 18
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial
court seriously erred and gravely abused its discretion in denying her motion to dismiss despite
discovery, during the trial of the case, of evidence that would constitute a ground for dismissal of the
case.19
The Court of Appeals granted the petition based on the following grounds:
It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when the
latter voluntarily appeared or submitted to the court or by coercive process issued by the court to
him, x x x. In this case, it is undisputed that when petitioner Boston filed the complaint on December
24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such being the case, the court a quo
could not have acquired jurisdiction over the person of defendant Manuel S. Toledo.
x x x the court a quos denial of respondents motion to dismiss was based on its finding that
respondents attack on the jurisdiction of the court was already barred by laches as respondent
failed to raise the said ground in its [sic] amended answer and during the pre-trial, despite her active
participation in the proceedings.
However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal. By timely raising the issue on jurisdiction in her motion
to dismiss x x x respondent is not estopped from raising the question on jurisdiction.
Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet decided
the case, hence, there is no basis for the court a quo to invoke estoppel to justify its denial of the
motion for reconsideration;
It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already
dead. The complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only
the wife, considering that the estate of Manuel S. Toledo is an indispensable party, which stands to
be benefited or be injured in the outcome of the case. x x x
xxxx

Respondents motion to dismiss the complaint should have been granted by public respondent judge
as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary with
another debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo, in
conformity with the provision of Section 6, Rule 86 of the Rules of Court, x x x. 20
The Court of Appeals denied petitioners motion for reconsideration. Hence, this petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:
1. Respondent is already estopped from questioning the trial courts jurisdiction;
2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
indispensable party;
3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting
the dismissal of the case before the lower court; and
4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner
file its claim against the estate of Manuel.
In essence, what is at issue here is the correctness of the trial courts orders denying respondents
motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well
settled is the rule that the special civil action for certiorari is not the proper remedy to assail the
denial by the trial court of a motion to dismiss. The order of the trial court denying a motion to
dismiss is merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves
something to be done by the court before a case is finally decided on the merits. 21 Therefore, "the
proper remedy in such a case is to appeal after a decision has been rendered." 22
As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education: 23
A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only
to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of
jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve
persons from arbitrary acts acts which courts or judges have no power or authority in law to
perform. It is not designed to correct erroneous findings and conclusions made by the courts.
(Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondents motion to dismiss. It, in fact, acted correctly when it issued the
questioned orders as respondents motion to dismiss was filed SIX YEARS AND FIVE MONTHS
AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already warranted the

outright dismissal of the motion for having been filed in clear contravention of the express mandate
of Section 1, Rule 16, of the Revised Rules of Court. Under this provision, a motion to dismiss shall
be filed within the time for but before the filing of an answer to the complaint or pleading asserting a
claim.24
More importantly, respondents motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioners and the trial courts
conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to delay
the prompt resolution of the case against her.
Also worth mentioning is the fact that respondents motion to dismiss under consideration herein is
not the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier
motion to dismiss26 on the sole ground of the unenforceability of petitioners claim under the Statute
of Frauds, which motion was denied by the trial court. More telling is the following narration of the
trial court in its Order denying respondents motion for reconsideration of the denial of her motion to
dismiss:
As can be gleaned from the records, with the admission of plaintiffs exhibits, reception of
defendants evidence was set on March 31, and April 23, 2004 x x x . On motion of the defendants,
the hearing on March 31, 2004 was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum
to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004. Reception of
defendants evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.
On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence
was cancelled upon the agreement of the parties. On July 28, 2004, in the absence of defendants
witness, hearing was reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a
demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x. 27
Respondents act of filing multiple motions, such as the first and earlier motion to dismiss and then
the motion to dismiss at issue here, as well as several motions for postponement, lends credibility to
the position taken by petitioner, which is shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the second motion to dismiss
was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from deviating or
straying off course from established jurisprudence on the matter, x x x had in fact faithfully observed
the law and legal precedents in this case."29 The Court of Appeals, therefore, erred not only in
entertaining respondents petition for certiorari, it likewise erred in ruling that the trial court committed
grave abuse of discretion when it denied respondents motion to dismiss.
On whether or not respondent is estopped from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will demonstrate,
jurisdiction over the person of Manuel should not be an issue in this case. A protracted discourse on
jurisdiction is, nevertheless, demanded by the fact that jurisdiction has been raised as an issue from
the lower court, to the Court of Appeals and, finally, before this Court. For the sake of clarity, and in

order to finally settle the controversy and fully dispose of all the issues in this case, it was deemed
imperative to resolve the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondents motion to dismiss questioning the trial courts
jurisdiction was filed more than six years after her amended answer was filed. According to
petitioner, respondent had several opportunities, at various stages of the proceedings, to assail the
trial courts jurisdiction but never did so for six straight years. Citing the doctrine laid down in the
case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that respondents failure to raise the
question of jurisdiction at an earlier stage bars her from later questioning it, especially since she
actively participated in the proceedings conducted by the trial court.
Petitioners argument is misplaced, in that, it failed to consider that the concept of jurisdiction has
several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3)
jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over the res
or the thing which is the subject of the litigation.31
The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches
is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue
involved was the authority of the then Court of First Instance to hear a case for the collection of a
sum of money in the amount of P1,908.00 which amount was, at that time, within the exclusive
original jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the
jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses Gonzaga v.
Court of Appeals,32 the issue for consideration was the authority of the regional trial court to hear and
decide an action for reformation of contract and damages involving a subdivision lot, it being argued
therein that jurisdiction is vested in the Housing and Land Use Regulatory Board pursuant to PD 957
(The Subdivision and Condominium Buyers Protective Decree). In Lee v. Presiding Judge, MTC,
Legaspi City,33 petitioners argued that the respondent municipal trial court had no jurisdiction over
the complaint for ejectment because the issue of ownership was raised in the pleadings. Finally, in
People v. Casuga,34 accused-appellant claimed that the crime of grave slander, of which she was
charged, falls within the concurrent jurisdiction of municipal courts or city courts and the then courts
of first instance, and that the judgment of the court of first instance, to which she had appealed the
municipal court's conviction, should be deemed null and void for want of jurisdiction as her appeal
should have been filed with the Court of Appeals or the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts
concerned over the subject matter of the case based on estoppel by laches, declaring that parties
cannot be allowed to belatedly adopt an inconsistent posture by attacking the jurisdiction of a court
to which they submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the trial court was that
courts jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches
finds no application in this case. Instead, the principles relating to jurisdiction over the person of the
parties are pertinent herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the
pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that
there is another action pending between the same parties for the same cause, or that the action is
barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. Subject to the provisions of Section 1 of Rule 9, a motion attacking a
pleading, order, judgment, or proceeding shall include all objections then available, and all objections
not so included shall be deemed waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even
if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x
Lack of jurisdiction over the subject matter can always be raised anytime, even for the first time on
appeal, since jurisdictional issues cannot be waived x x x subject, however, to the principle of
estoppel by laches."36
Since the defense of lack of jurisdiction over the person of a party to a case is not one of those
defenses which are not deemed waived under Section 1 of Rule 9, such defense must be invoked
when an answer or a motion to dismiss is filed in order to prevent a waiver of the defense. 37 If the
objection is not raised either in a motion to dismiss or in the answer, the objection to the jurisdiction
over the person of the plaintiff or the defendant is deemed waived by virtue of the first sentence of
the above-quoted Section 1 of Rule 9 of the Rules of Court. 38
The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned
decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for
the first time on appeal" and that, therefore, respondent timely raised the issue in her motion to
dismiss and is, consequently, not estopped from raising the question of jurisdiction. As the question
of jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed
waived if not raised in the answer or a motion to dismiss. In any case, respondent cannot claim the
defense since "lack of jurisdiction over the person, being subject to waiver, is a personal defense
which can only be asserted by the party who can thereby waive it by silence." 39
2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial
court did not acquire jurisdiction over the person of Manuel Toledo
In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A
defendant is informed of a case against him when he receives summons. "Summons is a writ by
which the defendant is notified of the action brought against him. Service of such writ is the means
by which the court acquires jurisdiction over his person."40
In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there
was no valid service of summons upon him, precisely because he was already dead even before the
complaint against him and his wife was filed in the trial court. The issues presented in this case are
similar to those in the case of Sarsaba v. Vda. de Te.41
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed
from employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in
the possession of Serenos employer was levied upon by a sheriff of the NLRC, accompanied by
Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of

motor vehicle and damages, with prayer for the delivery of the truck pendente lite was eventually
filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck.
After his motion to dismiss was denied by the trial court, petitioner Sarsaba filed his answer. Later
on, however, he filed an omnibus motion to dismiss citing, as one of the grounds, lack of jurisdiction
over one of the principal defendants, in view of the fact that Sereno was already dead when the
complaint for recovery of possession was filed.
Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the
issues submitted for resolution in both cases is similar: whether or not a case, where one of the
named defendants was already dead at the time of its filing, should be dismissed so that the claim
may be pursued instead in the proceedings for the settlement of the estate of the deceased
defendant. The petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of
the defendants died before summons was served on him, the trial court should have dismissed the
complaint against all the defendants and the claim should be filed against the estate of the deceased
defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be dismissed, not only
against Sereno, but as to all the defendants, considering that the RTC did not acquire jurisdiction
over the person of Sereno.42 This is exactly the same prayer made by respondent herein in her
motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioners argument that the complaint against the other defendants
should have been dismissed, considering that the RTC never acquired jurisdiction over the person of
Sereno. The courts failure to acquire jurisdiction over ones person is a defense which is personal to
the person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view of his
death. Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of
having the case dismissed against all of the defendants. Failure to serve summons on Serenos
person will not be a cause for the dismissal of the complaint against the other defendants,
considering that they have been served with copies of the summons and complaints and have long
submitted their respective responsive pleadings. In fact, the other defendants in the complaint were
given the chance to raise all possible defenses and objections personal to them in their respective
motions to dismiss and their subsequent answers.43 (Emphasis supplied.)
Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno
only.
Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to
dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court states:
SEC. 7. Compulsory joinder of indispensable parties. Parties-in-interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.
An indispensable party is one who has such an interest in the controversy or subject matter of a
case that a final adjudication cannot be made in his or her absence, without injuring or affecting that

interest. He or she is a party who has not only an interest in the subject matter of the controversy,
but "an interest of such nature that a final decree cannot be made without affecting that interest or
leaving the controversy in such a condition that its final determination may be wholly inconsistent
with equity and good conscience. It has also been considered that an indispensable party is a
person in whose absence there cannot be a determination between the parties already before the
court which is effective, complete or equitable." Further, an indispensable party is one who must be
included in an action before it may properly proceed. 44
On the other hand, a "person is not an indispensable party if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief between him or her and
those already parties to the action, or if he or she has no interest in the subject matter of the action."
It is not a sufficient reason to declare a person to be an indispensable party simply because his or
her presence will avoid multiple litigations.45
Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not
an indispensable party to the collection case, for the simple reason that the obligation of Manuel and
his wife, respondent herein, is solidary.
The contract between petitioner, on the one hand and respondent and respondents husband, on the
other, states:
FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON EQUITY
RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (P1,400,000.00)] x
x x.47
The provisions and stipulations of the contract were then followed by the respective signatures of
respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216 of the
Civil Code, petitioner may collect the entire amount of the obligation from respondent only. The
aforementioned provision states: "The creditor may proceed against any one of the solidary debtors
or some or all of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as the debt has
not been fully collected."
In other words, the collection case can proceed and the demands of petitioner can be satisfied by
respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel
is not an indispensable party to petitioners complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of
petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6
of Rule 86 of the Rules of Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for
money against the decedent, arising from contract, express or implied, whether the same be due,
not due, or contingent, all claims for funeral expenses and judgment for money against the
decedent, must be filed within the time limited in the notice; otherwise, they are barred forever,
except that they may be set forth as counterclaims in any action that the executor or administrator
may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with
another debtor, the claim shall be filed against the decedent as if he were the only debtor, without
prejudice to the right of the estate to recover contribution from the other debtor. x x x.
The Court of Appeals erred in its interpretation of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the
Revised Rules of Court, which latter provision has been retained in the present Rules of Court
without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v.
Villarama, et. al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken,
this Court held that where two persons are bound in solidum for the same debt and one of them
dies, the whole indebtedness can be proved against the estate of the latter, the decedents liability
being absolute and primary; x x x. It is evident from the foregoing that Section 6 of Rule 87 provides
the procedure should the creditor desire to go against the deceased debtor, but there is certainly
nothing in the said provision making compliance with such procedure a condition precedent before
an ordinary action against the surviving solidary debtors, should the creditor choose to demand
payment from the latter, could be entertained to the extent that failure to observe the same would
deprive the court jurisdiction to take cognizance of the action against the surviving debtors. Upon the
other hand, the Civil Code expressly allows the creditor to proceed against any one of the solidary
debtors or some or all of them simultaneously. There is, therefore, nothing improper in the creditors
filing of an action against the surviving solidary debtors alone, instead of instituting a proceeding for
the settlement of the estate of the deceased debtor wherein his claim could be filed.
The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v.
Asuncion51where the Supreme Court pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely
sets up the procedure in enforcing collection in case a creditor chooses to pursue his claim against
the estate of the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary
obligation) has the option whether to file or not to file a claim against the estate of the solidary
debtor. x x x
xxxx
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter.
Said provision gives the creditor the right to "proceed against anyone of the solidary debtors or some
or all of them simultaneously." The choice is undoubtedly left to the solidary creditor to determine
against whom he will enforce collection. In case of the death of one of the solidary debtors, he (the
creditor) may, if he so chooses, proceed against the surviving solidary debtors without necessity of
filing a claim in the estate of the deceased debtors. It is not mandatory for him to have the case
dismissed as against the surviving debtors and file its claim against the estate of the deceased
solidary debtor, x x x. For to require the creditor to proceed against the estate, making it a condition
precedent for any collection action against the surviving debtors to prosper, would deprive him of his
substantive rightsprovided by Article 1216 of the New Civil Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied
literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of
Court, petitioner has no choice but to proceed against the estate of [the deceased debtor] only.
Obviously, this provision diminishes the [creditors] right under the New Civil Code to proceed

against any one, some or all of the solidary debtors. Such a construction is not sanctioned by
principle, which is too well settled to require citation, that a substantive law cannot be amended by a
procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made
to prevail over Article 1216 of the New Civil Code, the former being merely procedural, while the
latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party and the case can
proceed as against respondent only. That petitioner opted to collect from respondent and not from
the estate of Manuel is evidenced by its opposition to respondents motion to dismiss asserting that
the case, as against her, should be dismissed so that petitioner can proceed against the estate of
Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on motion
of any party or on its own initiative at any stage of the action and on such terms as are just. Any
claim against a misjoined party may be severed and proceeded with separately."
Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the
capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued in
a separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be
considered a misjoinder, as in fact, the action would have proceeded against him had he been alive
at the time the collection case was filed by petitioner. This being the case, the remedy provided by
Section 11 of Rule 3 does not obtain here. The name of Manuel as party-defendant cannot simply be
dropped from the case. Instead, the procedure taken by the Court in Sarsaba v. Vda. de Te, 52 whose
facts, as mentioned earlier, resemble those of this case, should be followed herein. There, the
Supreme Court agreed with the trial court when it resolved the issue of jurisdiction over the person of
the deceased Sereno in this wise:
As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the
person of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio
Sereno is concerned. Patricio Sereno died before the summons, together with a copy of the
complaint and its annexes, could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one of the defendants
herein, does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x
x, were validly served with summons and the case with respect to the answering defendants may
still proceed independently. Be it recalled that the three (3) answering defendants have previously
filed a Motion to Dismiss the Complaint which was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a
claim against the estate of Patricio Sereno, but the case with respect to the three (3) other accused
[sic] will proceed. (Emphasis supplied.)53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of
the Rules of Court, which states that: only natural or juridical persons, or entities authorized by law
may be parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v.
Militante,54 held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of

justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law
and possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully
prosecuted save in the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he
institutes a judicial proceeding, to name the proper party defendant to his cause of action. In a suit or
proceeding in personam of an adversary character, the court can acquire no jurisdiction for the
purpose of trial or judgment until a party defendant who actually or legally exists and is legally
capable of being sued, is brought before it. It has even been held that the question of the legal
personality of a party defendant is a question of substance going to the jurisdiction of the court and
not one of procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving
spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the
ground that the defendant as named in the complaint had no legal personality. We agree.
1wphi1

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent,
a decedent does not have the capacity to be sued and may not be named a party defendant in a
court action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law,
the complaint may be dismissed on the ground that the pleading asserting the claim states no cause
of action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of
Court, because a complaint cannot possibly state a cause of action against one who cannot be a
party to a civil action.55
Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the
dismissal of the case as against him, thus did the trial court err when it ordered the substitution of
Manuel by his heirs. Substitution is proper only where the party to be substituted died during the
pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which
states:
Death of party;duty of counsel. Whenever a party to a pending action dies, and the claim is not
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days
after such death of the fact thereof, and to give the name and address of his legal representative or
representatives. x x x
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice. (Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the complaint, the court never
acquired jurisdiction over his person and, in effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution
dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and SET
ASIDE. The Orders of the Regional Trial Court dated 8 November 2004 and 22 December 2004,
respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional Trial Court, Branch 24,

Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672 against respondent
Lolita G. Toledo only, in accordance with the above pronouncements of the Court, and to decide the
case with dispatch.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195033

October 12, 2011

AGG Trucking and/or Alex Ang Gaeid, Petitioners,

vs.
MELANIO B. YUAG, Respondent.
DECISION
SERENO, J.:
In this Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of Writ of Temporary
and/or Permanent Injunction, assailed is the 23 June 2010 Decision of the Court of Appeals (CA),
Cagayan de Oro City, in CA-G.R. SP No. 01854-MIN. 1 Reversing the 30 November 2006 Resolution
of the National Labor Relations Commission and reinstating, with modification, the 30 August 2006
Decision of the labor arbiter, the CA disposed as follows:
WHEREFORE, premises considered, the instant Petition is hereby GRANTED, and the Resolution
dated November 30, 2006 is hereby REINSTATED subject to MODIFICATION, thus:
Private respondent Alex Ang Gaeid and/or AAG Trucking is hereby ORDERED to pay petitioner
Melanio B. Yuag or his heirs or assigns the following:
(1) FULL BACKWAGES, inclusive of all allowances, other benefits or their monetary
equivalent computed from the time petitioner's compensation was withheld from him starting
December 6, 2004 until the time he was employed by his new employer (Bernie
Ragandang), instead of the date of his supposed reinstatement which We no longer require
as explained above.
(2) SEPARATION PAY (in lieu of the supposed reinstatement) equivalent to one-half ()
month pay for every year of service. A fraction of at least six (6) months shall be considered
one (1) whole year.
(3) TEMPERATE DAMAGES in the amount of Five Thousand Pesos (Php5,000.00) for the
financial loss suffered by the petitioner when he was abruptly dismissed as a truck driver on
December 6, 2004 (during or around the Christmas season), although the exact amount of
such damage is incapable of exact determination); and

(4) EXEMPLARY DAMAGES in the amount of Five Thousand Pesos (Php5,000.00) as a

corrective measure in order to set out an example to serve as a negative incentive or
deterrent against socially deleterious actions.
Considering that a person's wage is his/her means of livelihood i.e., equivalent to life itself, this
decision is deemed immediately executory pending appeal, should the private respondent decide to
elevate this case to the Supreme Court.
SO ORDERED.2
The Motion for Reconsideration filed by petitioner was denied by the CA. 3 Hence, this Petition.
The facts of the case are simple. Petitioner Alex Ang Gaeid had employed respondent Melanio Yuag
as a driver since 28 February 2002. He alleged that he had a trucking business, for which he had 41
delivery trucks driven by 41 drivers, one of whom was respondent.4 His clients were Busco Sugar
Milling Co., Inc., operating in Quezon, Bukidnon; and Coca-cola Bottlers Company in Davao City and
Cagayan de Oro City.5 Respondent received his salary on commission basis of 9% of his gross
delivery per trip. He was assigned to a ten-wheeler truck and was tasked to deliver sacks of sugar
from the Busco Sugar Mill to the port of Cagayan de Oro. 6 Petitioner noticed that respondent had
started incurring substantial shortages since 30 September 2004, when he allegedly had a shortage
of 32 bags, equivalent to P 48,000; followed by 50 bags, equivalent to P 75,000, on 11 November
2004.7 It was also reported that he had illegally sold bags of sugar along the way at a lower price,
and that he was banned from entering the premises of the Busco Sugar Mill. 8 Petitioner asked for an
explanation from respondent who remained quiet. 9
Alarmed at the delivery shortages, petitioner took it upon himself to monitor all his drivers, including
respondent, by instructing them to report to him their location from time to time through their mobile
phones.10 He also required them to make their delivery trips in convoy, in order to avoid illegal sale of
cargo along the way.11
Respondent, along with 20 other drivers, was tasked to deliver bags of sugar from Cagayan de Oro
City to Coca-Cola Bottlers Plant in Davao City on 4 December 2004.12 All drivers, with the exception
of Yuag who could not be reached through his cellphone, reported their location as instructed. Their
reported location gave evidence that they were indeed in convoy.13 Afterwards, everyone, except
Yuag, communicated that the delivery of their respective cargoes had been completed. 14 The CocaCola Plant in Davao later reported that the delivery had a suspiciously enormous shortage. 15
Respondent reported to the office of the petitioner on 6 December 2004. Allegedly in a calm and
polite manner, petitioner asked respondent to explain why the latter had not contacted petitioner for
two days, and he had not gone in convoy with the other trucks, as he was told to do. 16 Respondent
replied that the battery of his cellphone had broken down. 17 Petitioner then confronted him allegedly
still in a polite and civilized manner, regarding the large shortages, but the latter did not
answer.18 Petitioner afterwards told him to "just take a rest" or, in their vernacular, "pahulay lang
una."19 This exchange started the dispute since respondent construed it as a dismissal. He
demanded that it be done in writing, but petitioner merely reiterated that respondent should just take
a rest in the meanwhile.20 The former alleged that respondent had offered to resign and demanded
separation pay. At that time, petitioner could not grant the demand, as it would entail computation
which was the duty of the cashier.21 Petitioner asked him to come back the next day.
Instead of waiting for another day to go back to his employer, Respondent went to the Department of
Labor-Regional Arbitration Board X, that very day of the confrontation or on 6 December 2004.
There he filed a Complaint for illegal dismissal, claiming his separation pay and 13th month

pay.22 Subsequently, after the delivered goods to the Coca-Cola Plant were weighed on 9 December
2004, it was found out that there was a shortage of 111 bags of sugar, equivalent to P 166,000.23
Respondent argued that he was whimsically dismissed, just because he had not been able to
answer his employer's call during the time of the delivery.24 His reason for not answering was that the
battery pack of his cellphone had broken down. 25 Allegedly enraged by that incident, his employer,
petitioner herein, supposedly shouted at him and told him, "pahuway naka." 26 When he asked for a
clarification, petitioner allegedly told him, "wala nay daghan istorya, pahulay na!" This statement was
translated by the CA thus: "No more talking! Take a rest!" 27 He then realized that he was being
dismissed. When he asked for his separation pay, petitioner refused. 28 Respondent thus filed a
Complaint for illegal dismissal.
Ruling of the Labor Arbiter
On 30 August 2006, labor arbiter Nicodemus G. Palangan rendered his Decision sustaining
respondent's Complaint for illegal dismissal.29 The labor arbiter made a discourse on the existence of
an employer-employee relationship between the parties. In granting the relief sought by petitioner,
the labor arbiter held as follows:
For failure on the part of the respondent to substantially prove the alleged infraction (shortages)
committed by complainant and to afford him the due process mandated by law before he was
eventually terminated, complainant's dismissal from his employment is hereby declared illegal and
the respondent is liable to reinstate him with backwages for one (1) year but in view of the strained
relationship that is now prevailing between the parties, this Arbitration Branch finds it more equitable
to grant separation pay instead equivalent to one (1) month per year of service based on the
average income for the last year of his employment CY 2004 which is P9,974.51, as hereby
computed: 30
Thus, the labor arbiter awarded respondent separation pay and proportionate 13th month pay for
2004 and 13th month pay differential for 2003.31
Petitioner appealed to the NLRC, alleging that the latter erred in finding that respondent had been
illegally dismissed and that the utterance of "pahulay lang una" meant actual dismissal. 32 He also
alleged that the pecuniary awards of separation pay, backwages, proportionate 13th month pay and
differential were erroneous. He argued that pahulay lang una was not an act of dismissal; rather, he
merely wanted to give respondent a break, since the companys clients had lost confidence in
respondent. Thus, the latter allegedly had to wait for clients other than Busco Sugar Mill and CocaCola, which had banned respondent from entering their premises.
Ruling of the NLRC
In a Resolution dated 30 November 2006,33 the NLRC reversed the labor arbiter's ruling, holding as
follows:
While the general rule in dismissal cases is that the employer has the burden to prove that the
dismissal was for just or authorized causes and after due process, said burden is necessarily shifted
to the employee if the alleged dismissal is denied by the employer, as in this case, because a
dismissal is supposedly a positive and unequivocal act by the employer. Accordingly, it is the
employee that bears the burden of proving that in fact he was dismissed. It was then incumbent
upon complainant to prove that he was in fact dismissed from his job by individual respondent Alex
V. Ang Gaeid effective December 6, 2004 when the latter told him: Pahuway naka!" (You take a rest).
Sadly, he failed to discharge that burden. Even assuming that Mr. Gaeid had the intention at that

time of dismissing complainant from his job when he uttered the said words to him, there is no proof
showing of any overt act subsequently done by Mr. Gaeid that would suggest he carried out such
intention. There is no notice of termination served to complainant. Literally construing the remarks of
Mr. Gaeid as having been dismissed from his job, complainant immediately filed the instant
complaint for illegal dismissal on the same day without first ascertaining the veracity of the same.
The how, why and the wherefore of his alleged dismissal should be clearly demonstrated by
substantial evidence. Complainant failed to do so; hence, he cannot claim that he was illegally
dismissed from employment."34
The NLRC further held thus:
At best, complainant should be considered on leave of absence without pay pending his new
assignment. Not having been dismissed much less illegally, complainant is not entitled to the
awarded benefits of backwages and separation pay for lack of legal and factual basis." 35
The NLRC likewise held that the complainant was not entitled to 13th month pay, since he was paid
on purely commission basis, an exception under Presidential Decree No. 851 the law requiring
employers to pay 13th month pay to their employees.36
Respondent moved for reconsideration,37 in effect arguing that petitioner should not be allowed to
change the latters theory. Supposedly, the argument in the position paper of petitioner was that
there was no employer-employee relationship between them, and that he was compelled to dismiss
respondent because of the heavy losses the latter was bringing to petitioner. In this Motion for
Reconsideration, respondent admitted that his wife had received the Resolution on 12 January 2007,
but that he learned of it much later, on 7 February 2007, justifying the untimely filing of the motion. 38
The NLRC denied the Motion for Reconsideration for being filed out of time. 39 He and his counsel
each received notice of the NLRC's Resolution dated 30 November 2006, reversing the labor
arbiters Decision on 11 January 2007,40 but they only filed the motion 25 days after the period to file
had already lapsed.41 Respondent, thus, sought recourse from the CA through a Petition for a Writ of
Certiorari under Rule 65.
The CA Ruling
On 23 June 2010, brushing aside the "technicality" issue, the CA proceeded to resolve the
substantive issues which it deemed important, such as whether there was an employer-employee
relationship between petitioner and respondent, and whether it was correct for the NLRC to declare
that respondent was not illegally dismissed.42 It completely reversed the NLRC and came up with the
dispositive portion mentioned at the outset.
The Issues
Petitioner is now before us citing factual errors that the CA allegedly committed, such as not
appreciating petitioner's lack of intention to dismiss respondent. These factual errors, however, are
beyond this Court to determine, especially because the records of the proceedings at the level of the
labor arbiter were not attached to the Petition. The Court is more interested in the legal issues raised
by petitioner and rephrased by the Court as follows:
I

THE COURT OF APPEALS ERRED IN REVERSING THE NLRC WITHOUT ANY FINDING
OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION;
II
THE COURT OF APPEALS ERRED IN ENTERTAINING RESPONDENT'S PETITION
NOTWITHSTANDING THE FACT THAT HIS MOTION FOR RECONSIDERATION OF THE
NLRC'S DECISION WAS FILED OUT OF TIME;
III
THE COURT OF APPEALS ERRED IN GRANTING AWARDS BEYOND WHAT WAS
PRAYED FOR IN THE COMPLAINT SUCH AS THE AWARD OF TEMPERATE AND
EXEMPLARY DAMAGES
The Court's Ruling
We find the Petition impressed with merit.
A writ of certiorari is a remedy to correct errors of jurisdiction, for which reason it must clearly show
that the public respondent has no jurisdiction to issue an order or to render a decision. Rule 65 of the
Rules of Court has instituted the petition for certiorari to correct acts of any tribunal, board or officer
exercising judicial or quasi-judicial functions with grave abuse of discretion amounting to lack or
excess of jurisdiction. This remedy serves as a check on acts, either of excess or passivity, that
constitute grave abuse of discretion of a judicial or quasi-judicial function. This Court, in San
Fernando Rural Bank, Inc. v. Pampanga Omnibus Development Corporation and Dominic G.
Aquino,43 explained thus:
Certiorari is a remedy narrow in its scope and inflexible in character. It is not a general utility tool in
the legal workshop. Certiorari will issue only to correct errors of jurisdiction and not to correct errors
of judgment. An error of judgment is one which the court may commit in the exercise of its
jurisdiction, and which error is reviewable only by an appeal. Error of jurisdiction is one where the act
complained of was issued by the court without or in excess of jurisdiction and which error is
correctible only by the extraordinary writ of certiorari. As long as the court acts within its jurisdiction,
any alleged errors committed in the exercise of its discretion will amount to nothing more than mere
errors of judgment, correctible by an appeal if the aggrieved party raised factual and legal issues; or
a petition for review under Rule 45 of the Rules of Court if only questions of law are involved.
A cert[iorari] writ may be issued if the court or quasi-judicial body issues an order with grave abuse
of discretion amounting to excess or lack of jurisdiction. Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other
words, where the power is exercised in an arbitrary manner by reason of passion, prejudice, or
personal hostility, and it must be so patent or gross as to amount to an evasion of a positive duty or
to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. Mere abuse of
discretion is not enough. Moreover, a party is entitled to a writ of certiorari only if there is no appeal
nor any plain, speedy or adequate relief in the ordinary course of law.
The raison detre for the rule is that when a court exercises its jurisdiction, an error committed while
so engaged does not deprive it of the jurisdiction being exercised when the error was committed. If it
did, every error committed by a court would deprive it of its jurisdiction and every erroneous

judgment would be a void judgment. In such a situation, the administration of justice would not
survive. Hence, where the issue or question involved affects the wisdom or legal soundness of the
decision not the jurisdiction of the court to render said decision the same is beyond the province
of a special civil action for certiorari.44 (citations omitted)
Petitioner is correct in its argument that there must first be a finding on whether the NLRC committed
grave abuse of discretion and on what these acts were. In this case, the CA seemed to have
forgotten that its function in resolving a petition for certiorari was to determine whether there was
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent
NLRC. The CA proceeded to review the records and to rule on issues that were no longer disputed
during the appeal to the NLRC, such as the existence of an employer-employee relationship. The
pivotal issue before the NLRC was whether petitioners telling respondent to take a rest, or to have a
break, was already a positive act of dismissing him. This issue was not discussed by the CA.
A reading of the assailed Decision will readily reveal the patent errors of the CA. On page 11 of its
Decision, it held as follows: "The NLRC likewise concluded that petitioner was not entitled to
separation pay because he was not a regular employee of private respondent, he (the petitioner)
being paid on purely commission or pakyaw basis." The CA took off from that point to give a
discussion on regular employment and further held:
To Us, private respondent's "advice to take a rest" theory is nothing but a mere ploy to reinforce his
hypothesis that the petitioner is not a regular employee. What makes this worse is that the NLRC
bought private respondent's aforesaid theory hook, line and sinker and ruled that the petitioner was
neither dismissed from work, he (the petitioner) being considered merely on "leave of absence
without pay", nor is he (the petitioner) entitled to separation pay on the ground that he was paid on
purely "commission" or "pakyaw" basis which is in legal parlance, in effect, implies that the petitioner
is not a regular employee of the private respondent, but a mere seasonal worker or independent
contractor.
It is most disturbing to see how the CA regarded labor terms "paid on commission," "pakyaw" and
"seasonal worker" as one and the same. In labor law, they are different and have distinct meanings,
which we do not need to elaborate on in this Petition as they are not the issue here. It should also be
remembered that a regular status of employment is not based on how the salary is paid to an
employee. An employee may be paid purely on commission and still be considered a regular
employee.45 Moreover, a seasonal employee may also be considered a regular employee. 46
Further, the appreciation by the CA of the NLRC Resolution was erroneous. The fact is that the
refusal by the NLRC to grant separation pay was merely consistent with its ruling that there was no
dismissal. Since respondent was not dismissed, much less illegally dismissed, separation pay was
unnecessary. The CA looked at the issue differently and erroneously, as it held that the NLRC
refused to grant the award of separation pay because respondent had not been found to be a
regular employee. The NLRC had in fact made no such ruling. These are flagrant errors that are
reversible by this
Court. They should be corrected for the sake not only of the litigants, but also of the CA, so that it
would become more circumspect in its appreciation of the records before it.
We reviewed the NLRC Resolution that reversed the LA Decision and found nothing in it that was
whimsical, unreasonable or patently violative of the law. It was the CA which erred in finding faults
that were inexistent in the NLRC Resolution.

On the issue of the propriety of entertaining the Petition for Certiorari despite the prescribed Motion
for Reconsideration with the NLRC, we find another error committed by the CA. The pertinent
provisions of the 2005 Rules of Procedure of the NLRC are as follows:
Rule VII, Section 14. Motions for Reconsideration. Motions for reconsideration of any order,
resolution or decision of the Commission shall not be entertained except when based on palpable or
patent errors, provided that the motion is under oath and filed within ten (10) calendar days from
receipt of the order, resolution or decision, with proof of service that a copy of the same has been
furnished, within the reglementary period, the adverse party and provided further, that only one such
motion from the same party shall be entertained.
Rule VIII, Section 2. Finality of decisions of the Commission. (a) Finality of the decisions,
resolutions or orders of the Commission. Except as provided in Rule XI, Section 10, the decisions,
resolutions orders of the Commission/Division shall become executory after (10) calendar days from
receipt of the same.
When respondent failed to file a Motion for Reconsideration of the NLRCs 30 November 2006
Resolution within the reglementary period, the Resolution attained finality and could no longer be
modified by the Court of Appeals. The Court has ruled as follows:
[I]t is a fundamental rule that when a final judgment becomes executory, it thereby becomes
immutable and unalterable. The judgment may no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the court rendering it or by the
highest Court of the land. The only recognized exceptions are the correction of clerical errors or the
making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course,
where the judgment is void. Any amendment or alteration which substantially affects a final and
executory judgment is null and void for lack of jurisdiction, including the entire proceedings held for
that purpose.47
It cannot be argued that prescriptive periods are mere procedural rules and technicalities, which may
be brushed aside at every cry of injustice, and may be bent and broken by every appeal to pity. The
Courts ruling inVideogram Regulatory Board v. Court of Appeals finds application to the present
case:
There are certain procedural rules that must remain inviolable, like those setting the periods for
perfecting an appeal or filing a petition for review, for it is doctrinally entrenched that the right to
appeal is a statutory right and one who seeks to avail of that right must comply with the statute or
rules. The rules, particularly the requirements for perfecting an appeal within the reglementary period
specified in the law, must be strictly followed as they are considered indispensable interdictions
against needless delays and for orderly discharge of judicial business. Furthermore, the perfection of
an appeal in the manner and within the period permitted by law is not only mandatory but also
jurisdictional and the failure to perfect the appeal renders the judgment of the court final and
executory. Just as a losing party has the right to file an appeal within the prescribed period, the
winning party also has the correlative right to enjoy the finality of the resolution of his/her case.
1avvphi1

These periods are carefully guarded and lawyers are well-advised to keep track of their applications.
After all, a denial of a petition for being time-barred is a decision on the merits.
Similarly, a motion for reconsideration filed out of time cannot reopen a final and executory judgment
of the NLRC. Untimeliness in filing motions or petitions is not a mere technical or procedural defect,

as leniency regarding this requirement will impinge on the right of the winning litigant to peace of
mind resulting from the laying to rest of the controversy.
As to the third issue, since the CA could no longer modify the NLRC Resolution, it logically follows
that the modification of the award cannot be done either. Had the Resolution not yet attained finality,
the CA could have granted some other relief, even if not specifically sought by petitioner, if such
ruling is proper under the circumstances. Rule 65 of the Rules of Court provides:
Section. 8. Proceedings after comment is filed. After the comment or other pleadings required by the
court are filed, or the time for the filing thereof has expired, the court may hear the case or require
the parties to submit memoranda. If after such hearing or filing of memoranda or upon the expiration
of the period for filing, the court finds that the allegations of the petition are true, it shall render
judgment for such relief to which the petitioner is entitled.
However, the NLRC Resolution sought to be set aside had become final and executory 25 days
before respondent filed his Motion for Reconsideration. Thus, subsequent proceedings and
modifications are not allowed and are deemed null and void.
IN VIEW OF THE FOREGOING, the Petition is GRANTED. The assailed 23 June 2010 Decision of
the Court of Appeals and its 20 December 2010 Resolution are hereby SET ASIDE. The 30
November 2006 and 30 March 2010 Resolutions of the NLRC are AFFIRMED and sustained.
SO ORDERED.
MARIA LOURDES P. A. SERENO
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 197592 & 20262

November 27, 2013

THE PROVINCE OF AKLAN, Petitioner,

vs.
JODY KING CONSTRUCTION AND DEVELOPMENT CORP., Respondent.
DECISION
VILLARAMA, JR., J.:
These consolidated petitions for review on certiorari seek to reverse and set aside the following: (1)
Decision dated October 18, 2010 and Resolution dated July 5, 2011 of the Court of Appeals (CA) in
CA-G.R. SP No. 111754; and (2) Decision dated August 31, 2011 and Resolution dated June 27,
2012 in CA-G.R. SP No. 114073.
1

The Facts

On January 12, 1998, the Province of Aklan (petitioner) and Jody King Construction and
Development Corp. (respondent) entered into a contract for the design and -construction of the
Caticlan Jetty Port and Terminal (Phase I) in Malay, Aklan. The total project cost is P38,900,000: P
18,700,000 for the design and construction of passenger terminal, and P20,200,000 for the design
and construction of the jetty port facility. In the course of construction, petitioner issued
variation/change orders for additional works. The scope of work under these change orders were
agreed upon by petitioner and respondent.
5

On January 5, 2001, petitioner entered into a negotiated contract with respondent for the
construction of Passenger Terminal Building (Phase II) also at Caticlan Jetty Port in Malay, Aklan.
The contract price for Phase II is P2,475,345.54.
7

On October 22, 2001, respondent made a demand for the total amount of P22,419,112.96 covering
the following items which petitioner allegedly failed to settle:
1. Unpaid accomplishments on additional works
undertaken - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 12,396,143.09
2. Refund of taxes levied despite it not being
covered by original contract- - - - - - - - - - - - - - - - - - - - - - Php 884,098.59
3. Price escalation (Consistent with Section 7.5,
Original Contract- - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 1,291,714.98
4. Additional Labor Cost resulting [from]
numerous change orders issued sporadically - - - - - - - - Php 3,303,486.60
5. Additional Overhead Cost resulting [from]
numerous Orders issued sporadically - - - - - - - - - - - - - Php 1,101,162.60
6. Interest resulting [from] payment delays
consistent with Section 7.3.b of the Original
Contract - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 3,442,507.50.

On July 13, 2006, respondent sued petitioner in the Regional Trial Court (RTC) of Marikina City (Civil
Case No. 06-1122-MK) to collect the aforesaid amounts. On August 17, 2006, the trial court issued a
writ of preliminary attachment.
9

10

Petitioner denied any unpaid balance and interest due to respondent. It asserted that the sums being
claimed by respondent were not indicated in Change Order No. 3 as approved by the Office of
Provincial Governor. Also cited was respondents June 10, 2003 letter absolving petitioner from
liability for any cost in connection with the Caticlan Passenger Terminal Project.
11

After trial, the trial court rendered its Decision on August 14, 2009, the dispositive portion of which
reads:
12

WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of plaintiff Jody
King Construction And Development Corporation and against defendant Province of Aklan, as
follows:

1. ordering the defendant to pay to the plaintiff the amount of Php7,396,143.09 representing
the unpaid accomplishment on additional works undertaken by the plaintiff;
2. ordering the defendant to refund to the plaintiff the amount of Php884,098.59 representing
additional 2% tax levied upon against the plaintiff;
3. ordering the defendant to pay to the plaintiff price escalation in the amount of
Php1,291,714.98 pursuant to Section 7.5 of the original contract;
4. ordering the defendant to pay to the plaintiff the amount of Php3,303,486.60 representing
additional labor cost resulting from change orders issued by the defendant;
5. ordering the defendant to pay to the plaintiff the sum of Php1,101,162.00 overhead cost
resulting from change orders issued by the defendant;
6. ordering the defendant to pay the sum of Php3,442,507.50 representing interest resulting
from payment delays up to October 15, 2001 pursuant to Section 7.3.b of the original
contract;
7. ordering the defendant to pay interest of 3% per month from unpaid claims as of October
16, 2001 to date of actual payment pursuant to Section 7.3.b[;]
8. ordering the [defendant] to pay to the plaintiff the sum of Php500,000.00 as moral
damages;
9. ordering the defendant to pay to the plaintiff the sum of Php300,000.00 as exemplary
damages;
10. ordering the defendant to pay the plaintiff the sum of Php200,000.00, as and for
attorneys fees; and
11. ordering the defendant to pay the cost of suit.
SO ORDERED.

13

Petitioner filed its motion for reconsideration on October 9, 2009 stating that it received a copy of
the decision on September 25, 2009. In its Order dated October 27, 2009, the trial court denied the
motion for reconsideration upon verification from the records that as shown by the return card, copy
of the decision was actually received by both Assistant Provincial Prosecutor Ronaldo B. Ingente
and Atty. Lee T. Manares on September 23, 2009. Since petitioner only had until October 8, 2009
within which to file a motion for reconsideration, its motion filed on October 9, 2009 was filed one day
after the finality of the decision. The trial court further noted that there was a deliberate attempt on
both Atty. Manares and Prosecutor Ingente to mislead the court and make it appear that their motion
for reconsideration was filed on time. Petitioner filed a Manifestation reiterating the explanation set
forth in its Rejoinder to respondents comment/opposition and motion to dismiss that the wrong date
of receipt of the decision stated in the motion for reconsideration was due to pure inadvertence
attributable to the staff of petitioners counsel. It stressed that there was no intention to mislead the
trial court nor cause undue prejudice to the case, as in fact its counsel immediately corrected the
error upon discovery by explaining the attendant circumstances in the Rejoinder dated October 29,
2009.
14

15

16

On November 24, 2009, the trial court issued a writ of execution ordering Sheriff IV Antonio E.
Gamboa, Jr. to demand from petitioner the immediate payment of P67,027,378.34 and tender the
same to the respondent. Consequently, Sheriff Gamboa served notices of garnishment on Land
Bank of the Philippines, Philippine National Bank and Development Bank of the Philippines at their
branches in Kalibo, Aklan for the satisfaction of the judgment debt from the funds deposited under
the account of petitioner. Said banks, however, refused to give due course to the court order, citing
the relevant provisions of statutes, circulars and jurisprudence on the determination of government
monetary liabilities, their enforcement and satisfaction.
17

Petitioner filed in the CA a petition for certiorari with application for temporary restraining order
(TRO) and preliminary injunction assailing the Writ of Execution dated November 24, 2009, docketed
as CA-G.R. SP No. 111754.
On December 7, 2009, the trial court denied petitioners notice of appeal filed on December 1, 2009.
Petitioners motion for reconsideration of the December 7, 2009 Order was likewise denied. On May
20, 2010, petitioner filed another petition for certiorari in the CA questioning the aforesaid orders
denying due course to its notice of appeal, docketed as CA-G.R. SP No. 114073.
18

By Decision dated October 18, 2010, the CAs First Division dismissed the petition in CA-G.R. SP
No. 111754 as it found no grave abuse of discretion in the lower courts issuance of the writ of
execution. Petitioner filed a motion for reconsideration which was likewise denied by the CA. The CA
stressed that even assuming as true the alleged errors committed by the trial court, these were
insufficient for a ruling that grave abuse of discretion had been committed. On the matter of
execution of the trial courts decision, the appellate court said that it was rendered moot by
respondents filing of a petition before the Commission on Audit (COA).
On August 31, 2011, the CAs Sixteenth Division rendered its Decision dismissing the petition in CAG.R. SP No. 114073. The CA said that petitioner failed to provide valid justification for its failure to
file a timely motion for reconsideration; counsels explanation that he believed in good faith that the
August 14, 2009 Decision of the trial court was received on September 25, 2009 because it was
handed to him by his personnel only on that day is not a justifiable excuse that would warrant the
relaxation of the rule on reglementary period of appeal. The CA also held that petitioner is estopped
from invoking the doctrine of primary jurisdiction as it only raised the issue of COAs primary
jurisdiction after its notice of appeal was denied and a writ of execution was issued against it.
The Cases
In G.R. No. 197592, petitioner submits the following issues:
I.
WHETHER OR NOT THE DECISION DATED 14 AUGUST 2009 RENDERED BY THE
REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY AND THE WRIT OF
EXECUTION DATED 24 NOVEMBER 2009 SHOULD BE RENDERED VOID FOR LACK OF
JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.
II.
WHETHER OR NOT THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN RENDERING THE DECISION DATED 14 AUGUST 2009 AND ISSUING

THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 EVEN IT FAILED TO DISPOSE

ALL THE ISSUES OF THE CASE BY NOT RESOLVING PETITIONERS "URGENT
MOTION TO DISCHARGE EX-PARTE WRIT OF PRELIMINARY ATTACHMENT" DATED 31
AUGUST 2006.
III.
WHETHER OR NOT THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 WHICH
WAS HASTILY ISSUED IN VIOLATION OF SUPREME COURT ADMINISTRATIVE
CIRCULAR NO. 10-2000 SHOULD BE RENDERED VOID.
19

The petition in G.R. No. 202623 sets forth the following arguments:
Petitioner is not estopped in questioning the jurisdiction of the Regional Trial Court, Branch 273,
Marikina City over the subject matter of the case.
20

The petition for certiorari filed before the CA due to the RTCs denial of petitioners Notice of Appeal
was in accord with jurisprudence.
21

The Issues
The controversy boils down to the following issues: (1) the applicability of the doctrine of primary
jurisdiction to this case; and (2) the propriety of the issuance of the writ of execution.
Our Ruling
The petitions are meritorious.
COA has primary jurisdiction over private respondents money claims Petitioner is not estopped from
raising the issue of jurisdiction
The doctrine of primary jurisdiction holds that if a case is such that its determination requires the
expertise, specialized training and knowledge of the proper administrative bodies, relief must first be
obtained in an administrative proceeding before a remedy is supplied by the courts even if the matter
may well be within their proper jurisdiction. It applies where a claim is originally cognizable in the
courts, and comes into play whenever enforcement of the claim requires the resolution of issues
which, under a regulatory scheme, have been placed within the special competence of an
administrative agency. In such a case, the court in which the claim is sought to be enforced may
suspend the judicial process pending referral of such issues to the administrative body for its view or,
if the parties would not be unfairly disadvantaged, dismiss the case without prejudice.
22

23

The objective of the doctrine of primary jurisdiction is to guide the court in determining whether it
should refrain from exercising its jurisdiction until after an administrative agency has determined
some question or some aspect of some question arising in the proceeding before the court.
24

As can be gleaned, respondent seeks to enforce a claim for sums of money allegedly owed by
petitioner, a local government unit.
Under Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No. 1445, it
is the COA which has primary jurisdiction over money claims against government agencies and
instrumentalities.
25

26

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of
ten years, the examination and inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to the Government or any of its
subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned
or controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including non-governmental
entities subsidized by the government, those funded by donations through the government, those
required to pay levies or government share, and those for which the government has put up a
counterpart fund or those partly funded by the government. (Emphasis supplied.)
Pursuant to its rule-making authority conferred by the 1987 Constitution and existing laws, the COA
promulgated the 2009 Revised Rules of Procedure of the Commission on Audit. Rule II, Section 1
specifically enumerated those matters falling under COAs exclusive jurisdiction, which include
"money claims due from or owing to any government agency." Rule VIII, Section 1 further provides:
27

Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction over:
a) money claim against the Government; b) request for concurrence in the hiring of legal retainers by
government agency; c) write off of unliquidated cash advances and dormant accounts receivable in
amounts exceeding one million pesos (P1,000,000.00); d) request for relief from accountability for
loses due to acts of man, i.e. theft, robbery, arson, etc, in amounts in excess of Five Million pesos
(P5,000,000.00).
In Euro-Med Laboratories Phil., Inc. v. Province of Batangas, we ruled that it is the COA and not the
RTC which has primary jurisdiction to pass upon petitioners money claim against respondent local
government unit. Such jurisdiction may not be waived by the parties failure to argue the issue nor
active participation in the proceedings. Thus:
28

This case is one over which the doctrine of primary jurisdiction clearly held sway for although
petitioners collection suit for P487,662.80 was within the jurisdiction of the RTC, the circumstances
surrounding petitioners claim brought it clearly within the ambit of the COAs jurisdiction.
First, petitioner was seeking the enforcement of a claim for a certain amount of money against a
local government unit. This brought the case within the COAs domain to pass upon money claims
against the government or any subdivision thereof under Section 26 of the Government Auditing
Code of the Philippines:
The authority and powers of the Commission [on Audit] shall extend to and comprehend all matters
relating to x x x the examination, audit, and settlement of all debts and claims of any sort due from or
owing to the Government or any of its subdivisions, agencies, and instrumentalities. x x x.
The scope of the COAs authority to take cognizance of claims is circumscribed, however, by an
unbroken line of cases holding statutes of similar import to mean only liquidated claims, or those
determined or readily determinable from vouchers, invoices, and such other papers within reach of
accounting officers. Petitioners claim was for a fixed amount and although respondent took issue
with the accuracy of petitioners summation of its accountabilities, the amount thereof was readily
determinable from the receipts, invoices and other documents. Thus, the claim was well within the
COAs jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioners money claim was founded on a series of purchases for the medical supplies of
respondents public hospitals. Both parties agreed that these transactions were governed by the
Local Government Code provisions on supply and property management and their implementing
rules and regulations promulgated by the COA pursuant to Section 383 of said Code. Petitioners
claim therefore involved compliance with applicable auditing laws and rules on procurement. Such
matters are not within the usual area of knowledge, experience and expertise of most judges but
within the special competence of COA auditors and accountants. Thus, it was but proper, out of
fidelity to the doctrine of primary jurisdiction, for the RTC to dismiss petitioners complaint.
Petitioner argues, however, that respondent could no longer question the RTCs jurisdiction over the
matter after it had filed its answer and participated in the subsequent proceedings. To this, we need
only state that the court may raise the issue of primary jurisdiction sua sponte and its invocation
cannot be waived by the failure of the parties to argue it as the doctrine exists for the proper
distribution of power between judicial and administrative bodies and not for the convenience of the
parties. (Emphasis supplied.)
29

Respondents collection suit being directed against a local government unit, such money claim
should have been first brought to the COA. Hence, the RTC should have suspended the
proceedings and refer the filing of the claim before the COA. Moreover, petitioner is not estopped
from raising the issue of jurisdiction even after the denial of its notice of appeal and before the CA.
30

There are established exceptions to the doctrine of primary jurisdiction, such as: (a) where there is
estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is
patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official
inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively
small so as to make the rule impractical and oppressive; (e) where the question involved is purely
legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is
urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted
acts violate due process; (i) when the issue of non-exhaustion of administrative remedies has been
rendered moot; (j) when there is no other plain, speedy and adequate remedy; (k) when strong
public interest is involved; and, (l) in quo warranto proceedings. However, none of the foregoing
circumstances is applicable in the present case.
31

The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to
resolve a controversy the jurisdiction over which is initially lodged with an administrative body of
special competence. All the proceedings of the court in violation of the doctrine and all orders and
decisions rendered thereby are null and void.
32

33

Writ of Execution issued in violation of COAs primary jurisdiction is void

Since a judgment rendered by a body or tribunal that has no jurisdiction over the subject matter of
the case is no judgment at all, it cannot be the source of any right or the creator of any
obligation. All acts pursuant to it and all claims emanating from it have no legal effect and the void
judgment can never be final and any writ of execution based on it is likewise void.
34

35

Clearly, the CA erred in ruling that the RTC committed no grave abuse of discretion when it ordered
the execution of its judgment against petitioner and garnishment of the latters funds.
In its Supplement to the Motion for Reconsideration, petitioner argued that it is the COA and not the
RTC which has original jurisdiction over money claim against government agencies and
subdivisions. The CA, in denying petitioner's motion for reconsideration, simply stated that the issue
had become moot by respondent's filing of the proper petition with the COA. However, respondent's
1wphi1

belated compliance with the formal requirements of presenting its money claim before the COA did
not cure the serious errors committed by the RTC in implementing its void decision. The RTC's
orders implementing its judgment rendered without jurisdiction must be set aside because a void
judgment can never be validly executed.
Finally, the RTC should have exercised utmost caution, prudence and judiciousness in issuing the
writ of execution and notices of garnishment against petitioner. The RTC had no authority to direct
the immediate withdrawal of any portion of the garnished funds from petitioner's depositary
banks. Such act violated the express directives of this Court under Administrative Circular No. 102000, which was issued "precisely in order to prevent the circumvention of Presidential Decree No.
1445, as well as of the rules and procedures of the COA." WHEREFORE, both petitions in G.R.
Nos. 197592 and 202623 are GRANTED. The Decision dated October 18, 2010 and Resolution
dated July 5 2011 of the Court of Appeals in CA-G.R. SP No. 111754, and Decision dated August 31,
2011 and Resolution dated June 27, 2012 in CA- G.R. SP No. 114073 are hereby REVERSED and
SET ASIDE. The Decision dated August 14 2009, Writ of Execution and subsequent issuances
implementing the said decision of the Regional Trial Court of Marikina City in Civil Case No. 061122-MK are all SET ASIDE. No pronouncement as to costs.
36

37

38

SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176260

November 24, 2010

LUCIA BARRAMEDA VDA. DE BALLESTEROS, Petitioner,

vs.
RURAL BANK OF CANAMAN INC., represented by its Liquidator, the philippine deposit
insurance corporation, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Civil Procedure
assailing the August 15, 2006 Decision1 of the Court of Appeals (CA) in CA-G.R. No. 82711,
modifying the decision of the Regional Trial Court of Iriga City, Branch 36 (RTC-Iriga), in Civil Case
No. IR-3128, by ordering the consolidation of the said civil case with Special Proceeding Case No.
M-5290 (liquidation case) before the Regional Trial Court of Makati City, Branch 59 (RTC-Makati).
It appears from the records that on March 17, 2000, petitioner Lucia Barrameda Vda. De
Ballesteros (Lucia) filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of
Mortgage and Damages with prayer for Preliminary Injunction against her children, Roy, Rito, Amy,
Arabel, Rico, Abe, Ponce Rex and Adden, all surnamed Ballesteros, and the Rural Bank of

Canaman, Inc., Baao Branch (RBCI) before the RTC-Iriga. The case was docketed as Civil Case No.
IR-3128.
In her complaint, Lucia alleged that her deceased husband, Eugenio, left two (2) parcels of land
located in San Nicolas, Baao, Camarines Sur, each with an area of 357 square meters; that on
March 6, 1995, without her knowledge and consent, her children executed a deed of extrajudicial
partition and waiver of the estate of her husband wherein all the heirs, including Lucia, agreed to
allot the two parcels to Rico Ballesteros (Rico); that, still, without her knowledge and consent, Rico
mortgaged Parcel B of the estate in favor of RBCI which mortgage was being foreclosed for failure to
settle the loan secured by the lot; and that Lucia was occupying Parcel B and had no other place to
live. She prayed that the deed of extrajudicial partition and waiver, and the subsequent mortgage in
favor of RBCI be declared null and void having been executed without her knowledge and consent.
She also prayed for damages.
In its Answer, RBCI claimed that in 1979, Lucia sold one of the two parcels to Rico which
represented her share in the estate of her husband. The extrajudicial partition, waiver and mortgage
were all executed with the knowledge and consent of Lucia although she was not able to sign the
document. RBCI further claimed that Parcel B had already been foreclosed way back in 1999 which
fact was known to Lucia through the auctioning notary public. Attorneys fees were pleaded as
counterclaim.
The case was then set for pre-trial conference. During the pre-trial, RBCIs counsel filed a motion to
withdraw after being informed that Philippine Deposit Insurance Corporation (PDIC) would handle
the case as RBCI had already been closed and placed under the receivership of the PDIC.
Consequently, on February 4, 2002, the lawyers of PDIC took over the case of RBCI.
On May 9, 2003, RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga has
no jurisdiction over the subject matter of the action. RBCI stated that pursuant to Section 30,
Republic Act No. 7653(RA No. 7653), otherwise known as the "New Central Bank Act," the RTCMakati, already constituted itself, per its Order dated August 10, 2001, as the liquidation court to
assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No. IR3128 fell within the exclusive jurisdiction of such liquidation court. Lucia opposed the motion.
On July 29, 2003, the RTC-Iriga issued an order2 granting the Motion to Dismiss, to wit:
This resolves the Motion to Dismiss filed by the defendant Rural Bank of Canaman, Inc., premised
on the ground that this court has no jurisdiction over the subject matter of the action. This issue of
jurisdiction was raised in view of the pronouncement of the Supreme Court in Ong v. C.A. 253 SCRA
105 and in the case of Hernandez v. Rural Bank of Lucena, Inc., G.R. No. L-29791 dated January
10, 1978, wherein it was held that "the liquidation court shall have jurisdiction to adjudicate all claims
against the bank whether they be against assets of the insolvent bank, for Specific Performance,
Breach of Contract, Damages or whatever."
It is in view of this jurisprudential pronouncement made by no less than the Supreme Court, that this
case is, as far as defendant Rural Bank of Canaman Inc., is concerned, hereby ordered DISMISSED
without prejudice on the part of the plaintiff to ventilate their claim before the Liquidation Court now,
RTC Branch 59, Makati City.
SO ORDERED.

Not in conformity, Lucia appealed the RTC ruling to the CA on the ground that the RTC-Iriga erred in
dismissing the case because it had jurisdiction over Civil Case No. IR-3128 under the rule on
adherence of jurisdiction.
On August 15, 2006, the CA rendered the questioned decision ordering the consolidation of Civil
Case No. IR-3128 and the liquidation case pending before RTC-Makati. The appellate court
ratiocinated thus:
The consolidation is desirable in order to prevent confusion, to avoid multiplicity of suits and to
save unnecessary cost and expense. Needless to add, this procedure is well in accord with the
principle that the rules of procedure shall be liberally construed in order to promote their object and
to assist the parties in obtaining just, speedy and inexpensive determination of every action and
proceeding (Vallacar Transit, Inc. v. Yap, 126 SCRA 500 [1983]; Suntay v. Aguiluz, 209 SCRA 500
[1992] citing Ramos v. Ebarle, 182 SCRA 245 [1990]). It would be more in keeping with the demands
of equity if the cases are simply ordered consolidated. Pursuant to Section 2, Rule 1, Revised Rules
of Court, the rules on consolidation should be liberally construed to achieve the object of the parties
in obtaining just, speedy and inexpensive determination of their cases (Allied Banking Corporation v.
Court of Appeals, 259 SCRA 371 [1996]).
The dispositive portion of the decision reads:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED, in such a way that
the dismissal of this case (Civil Case No. IR-3128) is set aside and in lieu thereof another one is
entered ordering the consolidation of said case with the liquidation case docketed as Special
Proceeding No. M-5290 before Branch 59 of the Regional Trial Court of Makati City, entitled "In Re:
Assistance in the Judicial Liquidation of Rural Bank of Canaman, Camarines Sur, Inc., Philippine
Deposit Corporation, Petitioner." No pronouncement as to cost.
SO ORDERED.3
Lucia filed a motion for reconsideration4 but it was denied by the CA in its Resolution dated
December 14, 2006.5
Hence, the present petition for review on certiorari anchored on the following
GROUNDS
(I)
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE REGIONAL TRIAL
COURT OF IRIGA CITY, BRANCH 36 IS VESTED WITH JURISDICTION TO CONTINUE
TRYING AND ULTIMATELY DECIDE CIVIL CASE NO. IR-3128.
(II)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN
ORDERING THE CONSOLIDATION OF CIVIL CASE NO. IR-3128 WITH THE LIQUIDATION
CASE DOCKETED AS SPECIAL PROCEEDINGS NO. M-5290 BEFORE BRANCH 59 OF
THE REGIONAL TRIAL COURT OF MAKATI CITY.6

Given the foregoing arguments, the Court finds that the core issue to be resolved in this petition
involves a determination of whether a liquidation court can take cognizance of a case wherein the
main cause of action is not a simple money claim against a bank ordered closed, placed under
receivership of the PDIC, and undergoing a liquidation proceeding.
Lucia contends that the RTC-Iriga is vested with jurisdiction over Civil Case No. 3128, the
constitution of the liquidation court notwithstanding. According to her, the case was filed before the
RTC-Iriga on March 17, 2000 at the time RBCI was still doing business or before the defendant bank
was placed under receivership of PDIC in January 2001.
She further argues that the consolidation of the two cases is improper. Her case, which is for
annulment of deed of partition and waiver, deed of mortgage and damages, cannot be legally
brought before the RTC-Makati with the liquidation case considering that her cause of action against
RBCI is not a simple claim arising out of a creditor-debtor relationship, but one which involves her
rights and interest over a certain property irregularly acquired by RBCI. Neither is she a creditor of
the bank, as only the creditors of the insolvent bank are allowed to file and ventilate claims before
the liquidator, pursuant to the August 10, 2001 Order of the RTC-Makati which granted the petition
for assistance in the liquidation of RBCI.
In its Comment,7 PDIC, as liquidator of RBCI, counters that the consolidation of Civil Case No. 3128
with the liquidation proceeding is proper. It posits that the liquidation court of RBCI, having been
established, shall have exclusive jurisdiction over all claims against the said bank.
After due consideration, the Court finds the petition devoid of merit.
Lucias argument, that the RTC-Iriga is vested with jurisdiction to continue trying Civil Case No. IR3128 until its final disposition, evidently falls out from a strained interpretation of the law and
jurisprudence. She contends that:
Since the RTC-Iriga has already obtained jurisdiction over the case it should continue exercising
such jurisdiction until the final termination of the case. The jurisdiction of a court once attached
cannot be ousted by subsequent happenings or events, although of a character which would have
prevented jurisdiction from attaching in the first instance, and the Court retains jurisdiction until it
finally disposes of the case (Aruego Jr. v. Court of Appeals, 254 SCRA 711).
When a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to
proceed to final determination of the case is not affected by a new legislation transferring jurisdiction
over such proceedings to another tribunal. (Alindao v. Joson, 264 SCRA 211). Once jurisdiction is
vested, the same is retained up to the end of the litigation (Bernate v. Court of Appeals, 263 SCRA
323).8
The afore-quoted cases, cited by Lucia to bolster the plea for the continuance of her case, find no
application in the case at bench.
Indeed, the Court recognizes the doctrine on adherence of jurisdiction. Lucia, however, must be
reminded that such principle is not without exceptions. It is well to quote the ruling of the CA on this
matter, thus:
This Court is not unmindful nor unaware of the doctrine on the adherence of jurisdiction. However,
the rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is
that when the change in jurisdiction is curative in character (Garcia v. Martinez, 90 SCRA 331

[1979]; Calderon, Sr. v. Court of Appeals, 100 SCRA 459 [1980]; Atlas Fertilizer Corporation v.
Navarro, 149 SCRA 432 [1987]; Abad v. RTC of Manila, Br. Lll, 154 SCRA 664 [1987]).
For sure, Section 30, R.A. 7653 is curative in character when it declared that the liquidation court
shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims
against the Bank. The interpretation of this Section (formerly Section 29, R.A. 265) becomes more
obvious in the light of its intent. InManalo v. Court of Appeals (366 SCRA 752, [2001]), the Supreme
Court says:
xxx The requirement that all claims against the bank be pursued in the liquidation proceedings filed
by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and
designed to establish due process and orderliness in the liquidation of the bank, to obviate the
proliferation of litigations and to avoid injustice and arbitrariness (citing Ong v. CA, 253 SCRA 105
[1996]). The lawmaking body contemplated that for convenience, only one court, if possible, should
pass upon the claims against the insolvent bank and that the liquidation court should assist the
Superintendents of Banks and regulate his operations (citing Central Bank of the Philippines, et al. v.
CA, et al., 163 SCRA 482 [1988]).9
As regards Lucias contention that jurisdiction already attached when Civil Case No. IR-3128 was
filed with, and jurisdiction obtained by, the RTC-Iriga prior to the filing of the liquidation case before
the RTC-Makati, her stance fails to persuade this Court. In refuting this assertion, respondent PDIC
cited the case of Lipana v. Development Bank of Rizal10 where it was held that the time of the filing of
the complaint is immaterial, viz:
It is the contention of petitioners, however, that the placing under receivership of Respondent Bank
long after the filing of the complaint removed it from the doctrine in the said Morfe Case.
This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution
that will obviously prejudice the other depositors and creditors. Moreover, as stated in the said Morfe
case, the effect of the judgment is only to fix the amount of the debt, and not to give priority over
other depositors and creditors.
The cited Morfe case11 held that "after the Monetary Board has declared that a bank is insolvent and
has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit
of all the creditors, including depositors. The assets of the insolvent banking institution are held in
trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or
a preference over another by an attachment, execution or otherwise."
Thus, to allow Lucias case to proceed independently of the liquidation case, a possibility of
favorable judgment and execution thereof against the assets of RBCI would not only prejudice the
other creditors and depositors but would defeat the very purpose for which a liquidation court was
constituted as well.
Anent the second issue, Lucia faults the CA in directing the consolidation of Civil Case No. IR-3128
with Special Proceedings No. M-5290. The CA committed no error. Lucias complaint involving
annulment of deed of mortgage and damages falls within the purview of a disputed claim in
contemplation of Section 30 of R.A. 7653 (The New Central Bank Act). The jurisdiction should be
lodged with the liquidation court. Section 30 provides:
Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the
supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has wilfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.
For a quasi-bank, any person of recognized competence in banking or finance may be designated
as receiver.
The receiver shall immediately gather and take charge of all the assets and liabilities of the
institution, administer the same for the benefit of its creditors, and exercise the general powers of a
receiver under the Revised Rules of Court but shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the
institution: Provided, That the receiver may deposit or place the funds of the institution in nonspeculative investments. The receiver shall determine as soon as possible, but not later than ninety
(90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a
condition that it may be permitted to resume business with safety to its depositors and creditors and
the general public: Provided, That any determination for the resumption of business of the institution
shall be subject to prior approval of the Monetary Board.
If the receiver determines that the institution cannot be rehabilitated or permitted to resume business
in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the
board of directors of its findings and direct the receiver to proceed with the liquidation of the
institution. The receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of prior notice or
any other action, a petition for assistance in the liquidation of the institution pursuant to a
liquidation plan adopted by the Philippine Deposit Insurance Corporation for general
application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted
by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the
receiver after due notice, adjudicate disputed claims against the institution, assist the
enforcement of individual liabilities of the stockholders, directors and officers, and decide on
other issues as may be material to implement the liquidation plan adopted. The receiver shall
pay the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institution to money, dispose of the same to creditors and other
parties, for the purpose of paying the debts of such institution in accordance with the rules on
concurrence and preference of credit under the Civil Code of the Philippines and he may, in
the name of the institution, and with the assistance of counsel as he may retain, institute
such actions as may be necessary to collect and recover accounts and assets of, or defend
any action against, the institution. The assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the

moment the institution was placed under such receivership or liquidation, be exempt from
any order of garnishment, levy, attachment, or execution. [Emphasis supplied]
xxx
"Disputed claims" refers to all claims, whether they be against the assets of the insolvent bank, for
specific performance, breach of contract, damages, or whatever.12 Lucias action being a claim
against RBCI can properly be consolidated with the liquidation proceedings before the RTC-Makati.
A liquidation proceeding has been explained in the case of In Re: Petition For Assistance in the
Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of Internal Revenue 13 as follows:
A liquidation proceeding is a single proceeding which consists of a number of cases properly
classified as "claims." It is basically a two-phased proceeding. The first phase is concerned with the
approval and disapproval of claims. Upon the approval of the petition seeking the assistance of the
proper court in the liquidation of a closed entity, all money claims against the bank are required to be
filed with the liquidation court. This phase may end with the declaration by the liquidation court that
the claim is not proper or without basis. On the other hand, it may also end with the liquidation court
allowing the claim. In the latter case, the claim shall be classified whether it is ordinary or preferred,
and thereafter included Liquidator. In either case, the order allowing or disallowing a particular claim
is final order, and may be appealed by the party aggrieved thereby.
The second phase involves the approval by the Court of the distribution plan prepared by the duly
appointed liquidator. The distribution plan specifies in detail the total amount available for distribution
to creditors whose claim were earlier allowed. The Order finally disposes of the issue of how much
property is available for disposal. Moreover, it ushers in the final phase of the liquidation proceeding
- payment of all allowed claims in accordance with the order of legal priority and the approved
distribution plan.
xxx
A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with
a court of competent jurisdiction entitled, "Petition for Assistance in the Liquidation of e.g., Pacific
Banking Corporation." All claims against the insolvent are required to be filed with the liquidation
court. Although the claims are litigated in the same proceeding, the treatment is individual. Each
claim is heard separately. And the Order issued relative to a particular claim applies only to said
claim, leaving the other claims unaffected, as each claim is considered separate and distinct from
the others. x x x [Emphasis supplied.]
It is clear, therefore, that the liquidation court has jurisdiction over all claims, including that of Lucia
against the insolvent bank. As declared in Miranda v. Philippine Deposit Insurance
Corporation,14 regular courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the BSP, through the
Monetary Board, in the closure of financial institutions was in excess of jurisdiction, or with grave
abuse of discretion. The same is not obtaining in this present case.
1avvphi1

The power and authority of the Monetary Board to close banks and liquidate them thereafter when
public interest so requires is an exercise of the police power of the State. Police power, however, is
subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set aside
if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due
process and equal protection clauses of the Constitution.15

In sum, this Court holds that the consolidation is proper considering that the liquidation court has
jurisdiction over Lucias action. It would be more in keeping with law and equity if Lucias case is
consolidated with the liquidation case in order to expeditiously determine whether she is entitled to
recover the property subject of mortgage from RBCI and, if so, how much she is entitled to receive
from the remaining assets of the bank.
WHEREFORE, the petition is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 181416

November 11, 2013

MEDICAL PLAZA MAKATI CONDOMINIUM CORPORATION, Petitioner,

vs.
ROBERT H. CULLEN, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of
Appeals (CA) Decision dated July 10, 2007 and Resolution dated January 25, 2008 in CA-G.R. CV
No. 86614. The assailed decision reversed and set aside the September 9, 2005 Order of the
Regional Trial Court (RTC) of Makati, Branch 58 in Civil Case No. 03-1018; while the assailed
resolution denied the separate motions for reconsideration filed by petitioner Medical Plaza Makati
Condominium Corporation (MPMCC) and Meridien Land Holding, Inc. (MLHI).
1

The factual and procedural antecedents are as follows:

Respondent Robert H. Cullen purchased from MLHI condominium Unit No. 1201 of the Medical
Plaza Makati covered by Condominium Certificate of Title No. 45808 of the Register of Deeds of
Makati. Said title was later cancelled and Condominium Certificate of Title No. 64218 was issued in
the name of respondent.
On September 19, 2002, petitioner, through its corporate secretary, Dr. Jose Giovanni E. Dimayuga,
demanded from respondent payment for alleged unpaid association dues and assessments
amounting to P145,567.42. Respondent disputed this demand claiming that he had been religiously
paying his dues shown by the fact that he was previously elected president and director of
petitioner. Petitioner, on the other hand, claimed that respondents obligation was a carry-over of
that of MLHI. Consequently, respondent was prevented from exercising his right to vote and be
voted for during the 2002 election of petitioners Board of Directors. Respondent thus clarified from
MLHI the veracity of petitioners claim, but MLHI allegedly claimed that the same had already been
4

settled. This prompted respondent to demand from petitioner an explanation why he was considered
a delinquent payer despite the settlement of the obligation. Petitioner failed to make such
explanation. Hence, the Complaint for Damages filed by respondent against petitioner and MLHI,
the pertinent portions of which read:
7

xxxx
6. Thereafter, plaintiff occupied the said condominium unit no. 1201 and religiously paid all
the corresponding monthly contributions/association dues and other assessments imposed
on the same. For the years 2000 and 2001, plaintiff served as President and Director of the
Medical Plaza Makati Condominium Corporation;
7. Nonetheless, on September 19, 2002, plaintiff was shocked/surprised to receive a letter
from the incumbent Corporate Secretary of the defendant Medical Plaza Makati, demanding
payment of alleged unpaid association dues and assessments arising from plaintiffs
condominium unit no. 1201. The said letter further stressed that plaintiff is considered a
delinquent member of the defendant Medical Plaza Makati.
x x x;
8. As a consequence, plaintiff was not allowed to file his certificate of candidacy as director.
Being considered a delinquent, plaintiff was also barred from exercising his right to vote in
the election of new members of the Board of Directors x x x;
9. x x x Again, prior to the said election date, x x x counsel for the defendant [MPMCC] sent a
demand letter to plaintiff, anent the said delinquency, explaining that the said unpaid amount
is a carry-over from the obligation of defendant Meridien. x x x;
10. Verification with the defendant [MPMCC] resulted to the issuance of a certification stating
that Condominium Unit 1201 has an outstanding unpaid obligation in the total amount
of P145,567.42 as of November 30, 2002, which again, was attributed by defendant
[MPMCC] to defendant Meridien. x x x;
11. Due to the seriousness of the matter, and the feeling that defendant Meridien made false
representations considering that it fully warranted to plaintiff that condominium unit 1201 is
free and clear from all liens and encumbrances, the matter was referred to counsel, who
accordingly sent a letter to defendant Meridien, to demand for the payment of said unpaid
association dues and other assessments imposed on the condominium unit and being
claimed by defendant [MPMCC]. x x x;
12. x x x defendant Meridien claimed however, that the obligation does not exist considering
that the matter was already settled and paid by defendant Meridien to defendant [MPMCC]. x
x x;
13. Plaintiff thus caused to be sent a letter to defendant [MPMCC] x x x. The said letter x x x
sought an explanation on the fact that, as per the letter of defendant Meridien, the
delinquency of unit 1201 was already fully paid and settled, contrary to the claim of
defendant [MPMCC]. x x x;
14. Despite receipt of said letter on April 24, 2003, and to date however, no explanation was
given by defendant [MPMCC], to the damage and prejudice of plaintiff who is again obviously

being barred from voting/participating in the election of members of the board of directors for
the year 2003;
15. Clearly, defendant [MPMCC] acted maliciously by insisting that plaintiff is a delinquent
member when in fact, defendant Meridien had already paid the said delinquency, if any. The
branding of plaintiff as delinquent member was willfully and deceitfully employed so as to
prevent plaintiff from exercising his right to vote or be voted as director of the condominium
corporation; 16. Defendant [MPMCC]s ominous silence when confronted with claim of
payment made by defendant Meridien is tantamount to admission that indeed, plaintiff is not
really a delinquent member;
17. Accordingly, as a direct and proximate result of the said acts of defendant [MPMCC],
plaintiff experienced/suffered from mental anguish, moral shock, and serious anxiety.
Plaintiff, being a doctor of medicine and respected in the community further suffered from
social humiliation and besmirched reputation thereby warranting the grant of moral damages
in the amount of P500,000.00 and for which defendant [MPMCC] should be held liable;
18. By way of example or correction for the public good, and as a stern warning to all
similarly situated, defendant [MPMCC] should be ordered to pay plaintiff exemplary damages
in the amount of P200,000.00;
19. As a consequence, and so as to protect his rights and interests, plaintiff was constrained
to hire the services of counsel, for an acceptance fee of P100,000.00 plus P2,500.00 per
every court hearing attended by counsel;
20. In the event that the claim of defendant [MPMCC] turned out to be true, however, the
herein defendant Meridien should be held liable instead, by ordering the same to pay the
said delinquency of condominium unit 1201 in the amount of P145,567.42 as of November
30, 2002 as well as the above damages, considering that the non-payment thereof would be
the proximate cause of the damages suffered by plaintiff;
9

Petitioner and MLHI filed their separate motions to dismiss the complaint on the ground of lack of
jurisdiction. MLHI claims that it is the Housing and Land Use Regulatory Board (HLURB) which is
vested with the exclusive jurisdiction to hear and decide the case. Petitioner, on the other hand,
raises the following specific grounds for the dismissal of the complaint: (1) estoppel as respondent
himself approved the assessment when he was the president; (2) lack of jurisdiction as the case
involves an intra-corporate controversy; (3) prematurity for failure of respondent to exhaust all intracorporate remedies; and (4) the case is already moot and academic, the obligation having been
settled between petitioner and MLHI.
10

11

On September 9, 2005, the RTC rendered a Decision granting petitioners and MLHIs motions to
dismiss and, consequently, dismissing respondents complaint.
The trial court agreed with MLHI that the action for specific performance filed by respondent clearly
falls within the exclusive jurisdiction of the HLURB. As to petitioner, the court held that the complaint
states no cause of action, considering that respondents obligation had already been settled by
MLHI. It, likewise, ruled that the issues raised are intra-corporate between the corporation and
member.
12

13

On appeal, the CA reversed and set aside the trial courts decision and remanded the case to the
RTC for further proceedings. Contrary to the RTC conclusion, the CA held that the controversy is an
ordinary civil action for damages which falls within the jurisdiction of regular courts. It explained that
14

the case hinged on petitioners refusal to confirm MLHIs claim that the subject obligation had
already been settled as early as 1998 causing damage to respondent. Petitioners and MLHIs
motions for reconsideration had also been denied.
15

16

Aggrieved, petitioner comes before the Court based on the following grounds:
I.
THE COURT A QUO HAS DECIDED A QUESTION OF SUBSTANCE, NOT THERETOFORE
DETERMINED BY THE SUPREME COURT, OR HAS DECIDED IT IN A WAY NOT IN ACCORD
WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
DECLARED THE INSTANT CASE AN ORDINARY ACTION FOR DAMAGES INSTEAD OF AN
INTRA-CORPORATE CONTROVERSY COGNIZABLE BY A SPECIAL COMMERCIAL COURT.
II.
THE COURT A QUO HAS DECIDED THE INSTANT CASE IN A WAY NOT IN ACCORD WITH LAW
OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT TOOK
COGNIZANCE OF THE APPEAL WHILE RAISING ONLY PURE QUESTIONS OF LAW.
17

The petition is meritorious.

It is a settled rule that jurisdiction over the subject matter is determined by the allegations in the
complaint. It is not affected by the pleas or the theories set up by the defendant in an answer or a
motion to dismiss. Otherwise, jurisdiction would become dependent almost entirely upon the whims
of the defendant. Also illuminating is the Courts pronouncement in Go v. Distinction Properties
Development and Construction, Inc.:
18

19

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law
and determined by the allegations in the complaint which comprise a concise statement of the
ultimate facts constituting the plaintiffs cause of action. The nature of an action, as well as which
court or body has jurisdiction over it, is determined based on the allegations contained in the
complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or
some of the claims asserted therein. The averments in the complaint and the character of the relief
sought are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction
also remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some
of the claims asserted therein. x x x
20

Based on the allegations made by respondent in his complaint, does the controversy involve intracorporate issues as would fall within the jurisdiction of the RTC sitting as a special commercial court
or an ordinary action for damages within the jurisdiction of regular courts?
In determining whether a dispute constitutes an intra-corporate controversy, the Court uses two
tests, namely, the relationship test and the nature of the controversy test.
21

An intra-corporate controversy is one which pertains to any of the following relationships: (1)
between the corporation, partnership or association and the public; (2) between the corporation,
partnership or association and the State insofar as its franchise, permit or license to operate is
concerned; (3) between the corporation, partnership or association and its stockholders, partners,
members or officers; and (4) among the stockholders, partners or associates themselves. Thus,
22

under the relationship test, the existence of any of the above intra-corporate relations makes the
case intra-corporate.
23

Under the nature of the controversy test, "the controversy must not only be rooted in the existence of
an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative
rights and obligations under the Corporation Code and the internal and intra-corporate regulatory
rules of the corporation." In other words, jurisdiction should be determined by considering both the
relationship of the parties as well as the nature of the question involved.
24

25

Applying the two tests, we find and so hold that the case involves intra-corporate controversy. It
obviously arose from the intra-corporate relations between the parties, and the questions involved
pertain to their rights and obligations under the Corporation Code and matters relating to the
regulation of the corporation.
26

Admittedly, petitioner is a condominium corporation duly organized and existing under Philippine
laws, charged with the management of the Medical Plaza Makati. Respondent, on the other hand, is
the registered owner of Unit No. 1201 and is thus a stockholder/member of the condominium
corporation. Clearly, there is an intra-corporate relationship between the corporation and a
stockholder/member.
The nature of the action is determined by the body rather than the title of the complaint. Though
denominated as an action for damages, an examination of the allegations made by respondent in his
complaint shows that the case principally dwells on the propriety of the assessment made by
petitioner against respondent as well as the validity of petitioners act in preventing respondent from
participating in the election of the corporations Board of Directors. Respondent contested the
alleged unpaid dues and assessments demanded by petitioner.
1wphi1

The issue is not novel. The nature of an action involving any dispute as to the validity of the
assessment of association dues has been settled by the Court in Chateau de Baie Condominium
Corporation v. Moreno. In that case, respondents therein filed a complaint for intra-corporate
dispute against the petitioner therein to question how it calculated the dues assessed against them,
and to ask an accounting of association dues. Petitioner, however, moved for the dismissal of the
case on the ground of lack of jurisdiction alleging that since the complaint was against the
owner/developer of a condominium whose condominium project was registered with and licensed by
the HLURB, the latter has the exclusive jurisdiction. In sustaining the denial of the motion to dismiss,
the Court held that the dispute as to the validity of the assessments is purely an intra-corporate
matter between petitioner and respondent and is thus within the exclusive jurisdiction of the RTC
sitting as a special commercial court. More so in this case as respondent repeatedly questioned his
characterization as a delinquent member and, consequently, petitioners decision to bar him from
exercising his rights to vote and be voted for. These issues are clearly corporate and the demand for
damages is just incidental. Being corporate in nature, the issues should be threshed out before the
RTC sitting as a special commercial court. The issues on damages can still be resolved in the same
special commercial court just like a regular RTC which is still competent to tackle civil law issues
incidental to intra-corporate disputes filed before it.
27

28

Moreover, Presidential Decree No. 902-A enumerates the cases over which the Securities and
Exchange Commission (SEC) exercises exclusive jurisdiction:
xxxx
b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation,

partnership or association of which they are stockholders, members, or associates,

respectively; and between such corporation, partnership or association and the State insofar
as it concerns their individual franchise or right to exist as such entity; and
c) Controversies in the election or appointment of directors, trustees, officers, or managers of
such corporations, partnerships, or associations.
29

To be sure, this action partakes of the nature of an intra-corporate controversy, the jurisdiction over
which pertains to the SEC. Pursuant to Section 5.2 of Republic Act No. 8799, otherwise known as
the Securities Regulation Code, the jurisdiction of the SEC over all cases enumerated under Section
5 of Presidential Decree No. 902-A has been transferred to RTCs designated by this Court as
Special Commercial Courts. While the CA may be correct that the RTC has jurisdiction, the case
should have been filed not with the regular court but with the branch of the RTC designated as a
special commercial court. Considering that the RTC of Makati City, Branch 58 was not designated as
a special commercial court, it was not vested with jurisdiction over cases previously cognizable by
the SEC. The CA, therefore, gravely erred in remanding the case to the RTC for further
proceedings.
30

31

Indeed, Republic Act (RA) No. 9904, or the Magna Carta for Homeowners and Homeowners
Associations, approved on January 7, 2010 and became effective on July 10, 2010, empowers the
HLURB to hear and decide inter-association and/or intra-association controversies or conflicts
concerning homeowners associations. However, we cannot apply the same in the present case as it
involves a controversy between a condominium unit owner and a condominium corporation. While
the term association as defined in the law covers homeowners associations of other residential real
property which is broad enough to cover a condominium corporation, it does not seem to be the
legislative intent. A thorough review of the deliberations of the bicameral conference committee
would show that the lawmakers did not intend to extend the coverage of the law to such kind of
association. We quote hereunder the pertinent portion of the Bicameral Conference Committees
deliberation, to wit:
THE CHAIRMAN (SEN. ZUBIRI). Lets go back, Mr. Chair, very quickly on homeowners.
THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin lang, I think our views are similar, Your
Honor, Senator Zubiri, the entry of the condominium units might just complicate the whole matters.
So wed like to put it on record that were very much concerned about the plight of the Condominium
Unit Homeowners Association. But this could very well be addressed on a separate bill that Im
willing to co-sponsor with the distinguished Senator Zubiri, to address in the Condominium Act of the
Philippines, rather than address it here because it might just create a red herring into the entire thing
and it will just complicate matters, hindi ba?
THE CHAIRMAN (SEN. ZUBIRI). I also agree with you although I sympathize with them---although
we sympathize with them and we feel that many times their rights have been also violated by
abusive condominium corporations. However, there are certain things that we have to reconcile.
There are certain issues that we have to reconcile with this version.
In the Condominium Code, for example, they just raised a very peculiar situation under the
Condominium Code --- Condominium Corporation Act. Its five years the proxy, whereas here, its
three years. So there would already be violation or there will be already a problem with their version
and our version. Sino ang matutupad doon? Will it be our version or their version?

So I agree that has to be studied further. And because they have a law pertaining to the
condominium housing units, I personally feel that it would complicate matters if we include them.
Although I agree that they should be looked after and their problems be looked into.
Probably we can ask our staff, Your Honor, to come up already with the bill although we have no
more time. Hopefully we can tackle this again on the 15th Congress. But I agree with the sentiments
and the inputs of the Honorable Chair of the House panel.
May we ask our resource persons to also probably give comments?
Atty. Dayrit.
MR. DAYRIT.
Yes I agree with you. There are many, I think, practices in their provisions in the Condominium Law
that may be conflicting with this version of ours.
For instance, in the case of, lets say, the condominium, the so-called common areas and/or maybe
so called open spaces that they may have, especially common areas, they are usually owned by the
condominium corporation. Unlike a subdivision where the open spaces and/or the common areas
are not necessarily owned by the association. Because sometimes --- generally these are donated to
the municipality or to the city. And it is only when the city or municipality gives the approval or the
conformity that this is donated to the homeowners association. But generally, under PD [Presidential
Decree] 957, its donated. In the Condominium Corporation, hindi. Lahat ng mga open spaces and
common areas like corridors, the function rooms and everything, are owned by the corporation. So
thats one main issue that can be conflicting.
THE CHAIRMAN (SEN. ZUBIRI). Ill just ask for a one-minute suspension so we can talk.
THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you want to put a catchall phrase like what we
did in the Senior Citizens Act. Something like, to the extent --- paano ba iyon? To the extent that it is
practicable and applicable, the rights and benefits of the homeowners, are hereby extended to the --mayroon kaming ginamit na phrase eh...to the extent that it be practicable and applicable to the unit
homeoweners, is hereby extended, something like that. Its a catchall phrase. But then again, it
might create a...
MR. JALANDONI. It will become complicated. There will be a lot of conflict of laws between the two
laws.
THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At saka, I dont know. I think the --mayroon naman silang protection sa ano eh, di ba? Buyers decree doon sa Condominium Act. Im
sure there are provisions there eh. Huwag na lang, huwag na lang.
MR. JALANDONI. Mr. Chairman, I think it would be best if your previous comments that youd be
supporting an amendment. I think that would be --- Well, that would be the best course of action
with all due respect.
1wphi1

THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay. Thank you. So iyon na lang final proposal
naming yung catchall phrase, "With respect to the..."
32

xxxx

THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their final decision on the definition of
homeowners?
THE ACTING CHAIRMAN (REP. ZIALCITA).
We stick to the original, Mr. Chairman. Well just open up a whole can of worms and a whole new
ball game will come into play. Besides, I am not authorized, neither are you, by our counterparts to
include the condominium owners.
THE CHAIRMAN (SEN. ZUBIRI).
Basically that is correct. We are not authorized by the Senate nor because we have discussed this
lengthily on the floor, actually, several months on the floor. And we dont have the authority as well
for other Bicam members to add a provision to include a separate entity that has already their legal
or their established Republic Act tackling on that particular issue. But we just like to put on record,
we sympathize with the plight of our friends in the condominium associations and we will just
guarantee them that we will work on an amendment to the Condominium Corporation Code. So with
that we skipped, that is correct, we have to go back to homeowners association definition, Your
Honor, because we had skipped it altogether. So just quickly going back to Page 7 because there
are amendments to the definition of homeowners. If it is alright with the House Panel, adopt the
opening phrase of Subsection 7 of the Senate version as opening phrase of Subsection 10 of the
reconciled version.
xxxx

33

To be sure, RA 4726 or the Condominium Act was enacted to specifically govern a condominium.
Said law sanctions the creation of the condominium corporation which is especially formed for the
purpose of holding title to the common area, in which the holders of separate interests shall
automatically be members or shareholders, to the exclusion of others, in proportion to the
appurtenant interest of their respective units. The rights and obligations of the condominium unit
owners and the condominium corporation are set forth in the above Act.
34

Clearly, condominium corporations are not covered by the amendment. Thus, the intra-corporate
dispute between petitioner and respondent is still within the jurisdiction of the RTC sitting as a
special commercial court and not the HLURB. The doctrine laid down by the Court in Chateau de
Baie Condominium Corporation v. Moreno which in turn cited Wack Wack Condominium
Corporation, et al v. CA is still a good law.
35

36

WHEREFORE, we hereby GRANT the petition and REVERSE the Court of Appeals Decision dated
July 10, 2007 and Resolution dated January 25, 2008 in CA-G.R. CV No. 86614. The Complaint
before the Regional Trial Court of Makati City, Branch 58, which is not a special commercial court,
docketed as Civil Case No. 03-1018 is ordered DISMISSED for lack of jurisdiction. Let the case be
REMANDED to the Executive Judge of the Regional Trial Court of Makati City for re-raffle purposes
among the designated special commercial courts.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 140746

March 16, 2005

PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, Petitioner,

vs.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the Decision1 dated July 23 1999 and
Resolution2 dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453, entitled
"Standard Insurance Company, Inc., and Martina Gicale vs. PANTRANCO North Express, Inc., and
Alexander Buncan."
In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by
his mother Martina Gicale, respondent herein. It was then raining. While driving north bound along
the National Highway in Talavera, Nueva Ecija, a passenger bus, owned by Pantranco North
Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, was trailing behind. When
the two vehicles were negotiating a curve along the highway, the passenger bus overtook the
jeepney. In so doing, the passenger bus hit the left rear side of the jeepney and sped away.
Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co.,
Inc. (Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but respondent
Standard paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.
Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners
Pantranco and its driver Alexander Buncan, but they refused. This prompted respondents to file with
the Regional Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint and averred that
it is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.
On June 5, 1992, the trial court rendered a Decision3 in favor of respondents Standard and Martina,
thus:
"WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered in
favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against
defendants Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as
follows:
(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon
from November 27, 1984 until fully paid;

(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;
(3) to pay the sum of P10,000.00 for attorneys fees;
(4) to pay the expenses of litigation and the cost of suit.
SO ORDERED."
On appeal, the Court of Appeals, in a Decision4 dated July 23, 1999, affirmed the trial courts ruling,
holding that:
"The appellants argue that appellee Gicales claim of P13,415.00 and appellee insurance
companys claim of P8,000.00 individually fell under the exclusive original jurisdiction of the
municipal trial court. This is not correct because under the Totality Rule provided for under
Sec. 19, Batas Pambansa Bilang 129, it is the sum of the two claims that determines the
jurisdictional amount.
xxx
In the case at bench, the total of the two claims is definitely more than P20,000.00 which at
the time of the incident in question was the jurisdictional amount of the Regional Trial Court.
Appellants contend that there was a misjoinder of parties. Assuming that there was, under
the Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto), the
same does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint.
xxx
It does not need perspicacity in logic to see that appellees Gicales and insurance companys
individual claims against appellees (sic) arose from the same vehicular accident on October
28, 1984 involving appellant Pantrancos bus and appellee Gicales jeepney. That being the
case, there was a question of fact common to all the parties: Whose fault or negligence
caused the damage to the jeepney?
Appellants submit that they were denied their day in court because the case was deemed
submitted for decision "without even declaring defendants in default or to have waived the
presentation of evidence." This is incorrect. Of course, the court did not declare defendants
in default because that is done only when the defendant fails to tender an answer within the
reglementary period. When the lower court ordered that the case is deemed submitted for
decision that meant that the defendants were deemed to have waived their right to present
evidence. If they failed to adduce their evidence, they should blame nobody but themselves.
They failed to be present during the scheduled hearing for the reception of their evidence
despite notice and without any motion or explanation. They did not even file any motion for
reconsideration of the order considering the case submitted for decision.
Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly
established their liability for quasi-delict under Article 2176 of the Civil Code."
Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution
dated November 4, 1999.

Hence, this petition for review on certiorari raising the following assignments of error:
"I
WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF
THE ACTION CONSIDERING THAT RESPONDENTS RESPECTIVE CAUSE OF ACTION
AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME TRANSACTION NOR ARE
THERE QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS AND
RESPONDENTS.
II
WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING
THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT
BAR, RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.
III
WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE
PROCESS."
For their part, respondents contend that their individual claims arose out of the same vehicular
accident and involve a common question of fact and law. Hence, the RTC has jurisdiction over the
case.
I
Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of
each respondent did not arise from the same transaction and that there are no common questions of
law and fact common to both parties. Section 6, Rule 3 of the Revised Rules of Court, 5 provides:
"Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions is alleged to
exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in
these Rules, join as plaintiffs or be joined as defendants in one complaint, where any
question of law or fact common to all such plaintiffs or to all such defendants may arise in the
action; but the court may make such orders as may be just to prevent any plaintiff or
defendant from being embarrassed or put to expense in connection with any proceedings in
which he may have no interest."
Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or
series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants;
and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and
venue.6
In this case, there is a single transaction common to all, that is, Pantrancos bus hitting the rear side
of the jeepney. There is also a common question of fact, that is, whether petitioners are negligent.
There being a single transaction common to both respondents, consequently, they have the same
cause of action against petitioners.

To determine identity of cause of action, it must be ascertained whether the same evidence which is
necessary to sustain the second cause of action would have been sufficient to authorize a recovery
in the first.7 Here, had respondents filed separate suits against petitioners, the same evidence would
have been presented to sustain the same cause of action. Thus, the filing by both respondents of the
complaint with the court below is in order. Such joinder of parties avoids multiplicity of suit and
ensures the convenient, speedy and orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same Rules provides:
"Sec. 5. Joinder of causes of action. A party may in one pleading assert, in the alternative
or otherwise, as many causes of action as he may have against an opposing party, subject to
the following conditions:
xxx
(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction."
The above provision presupposes that the different causes of action which are joined accrue in favor
of the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is
involved.8 The issue of whether respondents claims shall be lumped together is determined by
paragraph (d) of the above provision. This paragraph embodies the "totality rule" as exemplified by
Section 33 (1) of B.P. Blg. 1299 which states, among others, that "where there are several claims or
causes of action between the same or different parties, embodied in the same complaint, the amount
of the demand shall be the totality of the claims in all the causes of action, irrespective of whether
the causes of action arose out of the same or different transactions."
As previously stated, respondents cause of action against petitioners arose out of the same
transaction. Thus, the amount of the demand shall be the totality of the claims.
Respondent Standards claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00,
or a total ofP21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has "exclusive original
jurisdiction over all other cases, in which the demand, exclusive of interest and cost or the value of
the property in controversy, amounts to more than twenty thousand pesos (P20,000.00)." Clearly, it
is the RTC that has jurisdiction over the instant case. It bears emphasis that when the complaint was
filed, R.A. 7691 expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit Trial
Courts had not yet taken effect. It became effective on April 15, 1994.
II
The finding of the trial court, affirmed by the Appellate Court, that petitioners are negligent and thus
liable to respondents, is a factual finding which is binding upon us, a rule well-established in our
jurisprudence. It has been repeatedly held that the trial court's factual findings, when affirmed by the
Appellate Court, are conclusive and binding upon this Court, if they are not tainted with arbitrariness
or oversight of some fact or circumstance of significance and influence. Petitioners have not
presented sufficient ground to warrant a deviation from this rule.10
III
There is no merit in petitioners contention that they were denied due process. Records show that
during the hearing, petitioner Pantrancos counsel filed two motions for resetting of trial which were

granted by the trial court. Subsequently, said counsel filed a notice to withdraw. After respondents
had presented their evidence, the trial court, upon petitioners motion, reset the hearing to another
date. On this date, Pantranco failed to appear. Thus, the trial court warned Pantranco that should it
fail to appear during the next hearing, the case will be submitted for resolution on the basis of the
evidence presented. Subsequently, Pantrancos new counsel manifested that his client is willing to
settle the case amicably and moved for another postponement. The trial court granted the motion.
On the date of the hearing, the new counsel manifested that Pantrancos employees are on strike
and moved for another postponement. On the next hearing, said counsel still failed to appear.
Hence, the trial court considered the case submitted for decision.
We have consistently held that the essence of due process is simply an opportunity to be heard, or
an opportunity to explain ones side or an opportunity to seek for a reconsideration of the action or
ruling complained of.11
Petitioner Pantranco filed an answer and participated during the trial and presentation of
respondents evidence. It was apprised of the notices of hearing issued by the trial court. Indeed, it
was afforded fair and reasonable opportunity to explain its side of the controversy. Clearly, it was not
denied of its right to due process. What is frowned upon is the absolute lack of notice and hearing
which is not present here.
WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999 and Resolution
dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453 are hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.